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Most demand for houses is from people. Most price increases are due to a lack of supply that exceeds population growth. Most lack of supply is caused by it bein

by _3u10 3y ago

Most demand for houses is from people. Most price increases are due to a lack of supply that exceeds population growth. Most lack of supply is caused by it being illegal to build higher / more dense, and a variety of other rules and regulations. Landlords are for the most part capitalizing on these broader market / regulatory trends.

catlikesshrimp 3y ago
I don't understand the downvotes. I honestly think what that is saying is true in a black and white way. Grandparent says: "get rid of all these complicated rent control and rent freezes and affordable housing scheme..." I think this is fertile for discussion. Rent freezes didn't work in Argentina (extreme example), my opinion is they don't work anywhere. But oversupply does reduce prices, as happened with evergrande in China. IMO interest in not having an oversupply bursting a bubble is precisely what parent is talking about. Again, in a very absolute way of looking at life.
- _3u10 3y ago
  Compare and contrast with Paraguay where you can build whatever you want whenever and there is an ample supply of housing and very little in rental returns. Argentina is a great example. That said rent is also cheap in Buenos Aires. But I think that is due to the economy rather than rent control. You’re right in that affordable housing in any real sense would be MASSIVELY unpopular with voters. You’d be looking at cutting values in half to reach 2000s levels of affordability or 75% to get to 1970s levels.
  - bombcar 3y ago
    The best that can be done is freezing house prices nominally (or close to it) and then let inflation take over as supply increases. People are really bad at working out constant dollars and have loans, as long as the nominal value is steady or going up slightly, they don't really care if the absolute value has dropped because of inflation.
    - kbolino 3y ago
      What mechanisms would be effective at controlling asset prices under inflationary monetary regimes?
HenriTEL 3y ago
No, price increase is mostly due to inflation trends. When there is an inflation trend the house market follows, for example in London, after the start of the war in Ukraine things like gas and gasoline price went up which created a legit price increase for products that depends on those. But we've also seen an increase in rent. And that's because estate agents knew that since there was an inflation trend people were expecting to pay more. So the whole market went up with no significant change in supply and demand.
- _3u10 3y ago
  You’re wrong and you don’t know what you’re talking about, I don’t mean to be rude but it’s more than just inflation. There is a mismatch between number of people and number of housing starts, it’s been this way for 20 years. Estate agents charge more because people will pay it because anyone who can’t afford it goes homeless or moves somewhere else. In London, where housing delivery has long trailed short of need, the population rose by 3.4 for every new home. This mismatch of housing supply and need has had drastic consequences for affordability. Rents increased 2.0 per cent per year in England on average over the last decade, according to data from Hometrack. Growth ranged from 2.4 per cent per year in London, where housing delivery was lowest relative to population growth. In the North East, by contrast, housebuilding all but kept pace with population growth and rents grew just 0.7 per cent per year. https://www.savills.co.uk/blog/article/309803/residential-property/housebuilding-2010-2020--population-growth-more-than-double-number-of-new-homes-built.aspx https://www.savills.co.uk/blog/article/309803/residential-pr... The ratio of house prices to earnings, another basic measure of housing affordability, increased from 6.9 in 2010 to 7.8 in 2019 across England. In the North East, where we delivered almost as many homes as people, homes became more affordable. In London, where housing supply falls far short of need, the ratio of house prices to earnings has ballooned.
  - HenriTEL 3y ago
    A large part of the price in indeed related to offer vs demand but that's the basics for any market. Now it's funny because you also say "Estate agents charge more because people will pay it because anyone who can’t afford it goes homeless [...]". So it isn't just offer and demand isn't it? When you think about it, even in areas like London the housing market is not liquid nor uniform enough for the offer vs demand model to apply. You don't rent/buy home like you buy strawberries. In about 1 year there was no significant increase in demand and the supply stayed the same but everybody saw its rent increase. Edit: Also we should not mix-things up, the housing market is very different in outliers like London compared to the more global market. Here we're in the context of those outliers (Paris, London, etc.)
tmnvix 3y ago
> Most price increases are due to a lack of supply that exceeds population growth. Citation definitely needed. In my opinion, cheap credit (i.e. low interest rates) is the primary culprit. It has created an awful lot of 'artificial demand' for properties as investments as opposed to demand for properties to be used as homes. In most markets I look at, the proportion of underutilised properties has been rising (second homes, short term rentals, land banking, etc). Here in NZ the sharp rise in interest rates caused a sudden and significant increase in homes available for sale and homes available to rent. Where did they come from?

by _3u10 3y ago

catlikesshrimp 3y ago

I don't understand the downvotes. I honestly think what that is saying is true in a black and white way. Grandparent says: "get rid of all these complicated rent control and rent freezes and affordable housing scheme..." I think this is fertile for discussion. Rent freezes didn't work in Argentina (extreme example), my opinion is they don't work anywhere. But oversupply does reduce prices, as happened with evergrande in China. IMO interest in not having an oversupply bursting a bubble is precisely what parent is talking about. Again, in a very absolute way of looking at life.

_3u10 3y ago
Compare and contrast with Paraguay where you can build whatever you want whenever and there is an ample supply of housing and very little in rental returns. Argentina is a great example. That said rent is also cheap in Buenos Aires. But I think that is due to the economy rather than rent control. You’re right in that affordable housing in any real sense would be MASSIVELY unpopular with voters. You’d be looking at cutting values in half to reach 2000s levels of affordability or 75% to get to 1970s levels.
- bombcar 3y ago
  The best that can be done is freezing house prices nominally (or close to it) and then let inflation take over as supply increases. People are really bad at working out constant dollars and have loans, as long as the nominal value is steady or going up slightly, they don't really care if the absolute value has dropped because of inflation.
  - kbolino 3y ago
    What mechanisms would be effective at controlling asset prices under inflationary monetary regimes?

HenriTEL 3y ago

No, price increase is mostly due to inflation trends. When there is an inflation trend the house market follows, for example in London, after the start of the war in Ukraine things like gas and gasoline price went up which created a legit price increase for products that depends on those. But we've also seen an increase in rent. And that's because estate agents knew that since there was an inflation trend people were expecting to pay more. So the whole market went up with no significant change in supply and demand.

_3u10 3y ago
You’re wrong and you don’t know what you’re talking about, I don’t mean to be rude but it’s more than just inflation. There is a mismatch between number of people and number of housing starts, it’s been this way for 20 years. Estate agents charge more because people will pay it because anyone who can’t afford it goes homeless or moves somewhere else. In London, where housing delivery has long trailed short of need, the population rose by 3.4 for every new home. This mismatch of housing supply and need has had drastic consequences for affordability. Rents increased 2.0 per cent per year in England on average over the last decade, according to data from Hometrack. Growth ranged from 2.4 per cent per year in London, where housing delivery was lowest relative to population growth. In the North East, by contrast, housebuilding all but kept pace with population growth and rents grew just 0.7 per cent per year. https://www.savills.co.uk/blog/article/309803/residential-property/housebuilding-2010-2020--population-growth-more-than-double-number-of-new-homes-built.aspx https://www.savills.co.uk/blog/article/309803/residential-pr... The ratio of house prices to earnings, another basic measure of housing affordability, increased from 6.9 in 2010 to 7.8 in 2019 across England. In the North East, where we delivered almost as many homes as people, homes became more affordable. In London, where housing supply falls far short of need, the ratio of house prices to earnings has ballooned.
- HenriTEL 3y ago
  A large part of the price in indeed related to offer vs demand but that's the basics for any market. Now it's funny because you also say "Estate agents charge more because people will pay it because anyone who can’t afford it goes homeless [...]". So it isn't just offer and demand isn't it? When you think about it, even in areas like London the housing market is not liquid nor uniform enough for the offer vs demand model to apply. You don't rent/buy home like you buy strawberries. In about 1 year there was no significant increase in demand and the supply stayed the same but everybody saw its rent increase. Edit: Also we should not mix-things up, the housing market is very different in outliers like London compared to the more global market. Here we're in the context of those outliers (Paris, London, etc.)

tmnvix 3y ago

> Most price increases are due to a lack of supply that exceeds population growth. Citation definitely needed. In my opinion, cheap credit (i.e. low interest rates) is the primary culprit. It has created an awful lot of 'artificial demand' for properties as investments as opposed to demand for properties to be used as homes. In most markets I look at, the proportion of underutilised properties has been rising (second homes, short term rentals, land banking, etc). Here in NZ the sharp rise in interest rates caused a sudden and significant increase in homes available for sale and homes available to rent. Where did they come from?