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> Just everything in Europe is tiny. T i n y. And frankly, it's not that much cheaper over here either The real kicker is that price of houses / assets is not

> Just everything in Europe is tiny. T i n y. And frankly, it's not that much cheaper over here either The real kicker is that price of houses / assets is not attached to physical reality any more. Financialization drives up the price of real estate. When the financial markets trade real estate, no-one gives a rat's ass if it's a mansion or a shed - the only thing that matters is that number goes up. As was demonstrated in 2008, no-one even knew anything about underlying value of the asset and nobody cared. In every country in EU number of houses per person has been increasing, and at the same time, prices of houses have been increasing. You cannot build your way out of this. Real solution to the housing crisis is to reign in financial markets, it's not anything to do with building.

avidiax 3y ago
30 year mortgages plus the 1/3rd of salary mortgage approval heuristic means that desirable real estate costs 10 years of salary. If we had 10 year maximum mortgages, real estate would cost 1/3rd as much, roughly.
antisthenes 3y ago
> Real solution to the housing crisis is to reign in financial markets, it's not anything to do with building. 12 years of ZIRP certainly didn't help. It's a massive payout to the finance sector and to people who had assets to borrow against (or even just a bunch of cash to put in the stock market).
tmnvix 3y ago
Absolutely. Nobody would be paying the current prices if they didn't expect the value to increase. Prices are a reflection of the financial value and not the utility. This is the reason that interest rates are fundamental. If we really have turned the corner on the steady decline of interest rates that we've seen over the last 20-30 years then property markets are not going to 'plateau'. They will fall to a point where new buyers can afford to service the loans. Of course, as noted above (prices being as high as they are due to expected future increases), if prices are falling then not only do new buyers wait for prices fall to a point where they can service the loans again, but they will also focus more on utility value as public sentiment moves away from 'property prices always go up'. This will compound the falls. That said, there will undoubtedly be a lot of policy engineering employed to avoid losses and kick the can further down the road. In the long run I don't think it will be successful. The only thing that will save the property market is a return to low rates. Every time the issue of housing affordability comes up on this site, the debate quickly moves to zoning and nimbys and such. In my view this is important to an extent (more so in some areas than others), and building more homes is always helpful, but it is not as significant as interest rates and the 'artificial' demand that is induced by speculation.

avidiax 3y ago

30 year mortgages plus the 1/3rd of salary mortgage approval heuristic means that desirable real estate costs 10 years of salary. If we had 10 year maximum mortgages, real estate would cost 1/3rd as much, roughly.

antisthenes 3y ago

> Real solution to the housing crisis is to reign in financial markets, it's not anything to do with building. 12 years of ZIRP certainly didn't help. It's a massive payout to the finance sector and to people who had assets to borrow against (or even just a bunch of cash to put in the stock market).

tmnvix 3y ago

Absolutely. Nobody would be paying the current prices if they didn't expect the value to increase. Prices are a reflection of the financial value and not the utility. This is the reason that interest rates are fundamental. If we really have turned the corner on the steady decline of interest rates that we've seen over the last 20-30 years then property markets are not going to 'plateau'. They will fall to a point where new buyers can afford to service the loans. Of course, as noted above (prices being as high as they are due to expected future increases), if prices are falling then not only do new buyers wait for prices fall to a point where they can service the loans again, but they will also focus more on utility value as public sentiment moves away from 'property prices always go up'. This will compound the falls. That said, there will undoubtedly be a lot of policy engineering employed to avoid losses and kick the can further down the road. In the long run I don't think it will be successful. The only thing that will save the property market is a return to low rates. Every time the issue of housing affordability comes up on this site, the debate quickly moves to zoning and nimbys and such. In my view this is important to an extent (more so in some areas than others), and building more homes is always helpful, but it is not as significant as interest rates and the 'artificial' demand that is induced by speculation.