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Rising prices will usually indicate a supply shortage, but for property there's also the element of speculation. In contrast, rents are a more reliable indicat

Rising prices will usually indicate a supply shortage, but for property there's also the element of speculation. In contrast, rents are a more reliable indicator of a shortage, no speculation there.

tmnvix 3y ago
Strictly speaking, rents (for long term rentals) can be an indicator of a shortage of available housing, but not necessarily a shortage in the total housing stock.
- chii 3y ago
  What's the difference between > shortage of available housing and > a shortage in the total housing stock. I dont think there is any.
  - spacebanana7 3y ago
    Social housing, tax incentives, rent controls and ownership restrictions can cause the two to diverge.
  - tmnvix 3y ago
    Second homes, short term rentals, and land banked properties are not available to use as a primary residence but are part of the total housing stock. I call these underutilised properties and suspect that there are more than most suspect. Demand for purchasing these properties is not the same as demand for homes. That is what is often overlooked when people consider solutions to the accommodation crisis (i.e. usually happy to think no further than 'build more houses' without considering everything that pushes up demand).
randomdata 3y ago
The most reliable indicator of a shortage is abandonment of a price-based mechanism in favour of something else, like a lottery or needs-based selection. If price is able to select the buyer, then you can't possibly have a shortage.
- chii 3y ago
  > If price is able to select the buyer, then you can't possibly have a shortage. unless you cannot produce regardless of the price. This is sometimes called a market failure. And it recently did happen, during covid. A lot of goods went up in price - and even then unable to procure it regardless.
  - randomdata 3y ago
    What do you mean unless? If no amount of money can produce something then you cannot select a buyer based on price. You have not found an exception. You're parroting the rule.
- TulliusCicero 3y ago
  That simply isn't the colloquial definition of a shortage. If rent is $20,000/month for a studio, going "well technically you can always get one if you can pay $20,000 a month so there's no shortage" is kind of a uselessly pedantic comment.
  - randomdata 3y ago
    I agree, in the case of "rent is $20,000/month" calling that a "shortage" doesn't say anything. It is no different than a case where "rent is $200/month". There is nothing the reader/listener can learn by adding shortage into the mix in either case. Pointless, yes, but I'm not sure pedantic is the right term for describing using a word in a way that does not communicate anything. But, to each their own.
    - Dylan16807 3y ago
      You can set reasonable price benchmarks to define "shortage" by. Your definition of shortage is too narrow. Price is always able to select a buyer. People will skip eating if you give them enough money. But if that only supplies a couple percent of buyers, that's not going to disprove a shortage.
disgruntledphd2 3y ago
> In contrast, rents are a more reliable indicator of a shortage, no speculation there. You'd think so, wouldn't you? However, again the Irish market disproves this to some extent. So generally you look at rents as a 12-14 year payback window of the house price (for investment). What happened in Ireland in the last decade is that rents increased, such that investors could pay more for houses, which increased rents etc etc. Like, there's all this purpose built accommodation in Dublin that's sitting empty because they want 3k euro for a two bed apartment. For reference, a top 5% taxpayer would clear about 6-8k euro per month, so those prices are entirely out of whack with what people can afford. But because it's all private capital, it's mark to myth so many of these apartments are empty. I work near the Central Bank, and there's loads of gorgeous six-eight floor blocks of apartments, all of which are entirely empty while we have far too many homeless people.
- chgs 3y ago
  Number of empty properties in Ireland dropped by 9% from 2016 to 2022
  - tmnvix 3y ago
    Interesting. Could you share a source?
    - ptrott2017 3y ago
      Not the OP but suspect the source is this: https://www.cso.ie/en/releasesandpublications/ep/p-cpr/censusofpopulation2022-preliminaryresults/housing/ https://www.cso.ie/en/releasesandpublications/ep/p-cpr/censu...
      - tmnvix 3y ago
        Thank you for this. It does clearly corroborate that figure of 9%. Still, 230,000 dwellings of 2,125,000 in total is a lot to be be vacant during an accommodation crisis. As I said elsewhere, the number of vacant dwellings is higher than most would suspect.
fasa99 3y ago
>In contrast, rents are a more reliable indicator of a shortage, no speculation there. Take a look at the Bay Area. One major distortion: property tax is fixed at the time of purchase. So all these people who bought a house in 1980 are paying yearly taxes at the 1980 rate. This compels people to hang onto the property at all costs, what a lucrative rental cash cow. Of course this also means tax revenue via property tax is skewed heavily to be paid for by new buyers. Imagine paying property tax on a 2 million dollar house, valued at 80K. This creates (a relative) oversupply in rental houses in the area due to people who intend to hang onto their homes forever. Naturally the area is very strong in NIMBYs seeking to retain home value, plus the political environment, is people who love the environment, so they will shed no tears if no houses are built in order to protect and preserve the pristine natural empty fields of the region. That's all to say the home buyer/seller dynamics in a region indirectly influence rental prices - vis a vis whether the person deciding to "not live in this house" chooses to simply sell the home or to rent it. This creates a little mini- supply/demand factor interacting with rental prices.

Rising prices will usually indicate a supply shortage, but for property there's also the element of speculation. In contrast, rents are a more reliable indicator of a shortage, no speculation there.

tmnvix 3y ago

Strictly speaking, rents (for long term rentals) can be an indicator of a shortage of available housing, but not necessarily a shortage in the total housing stock.

chii 3y ago
What's the difference between > shortage of available housing and > a shortage in the total housing stock. I dont think there is any.
- spacebanana7 3y ago
  Social housing, tax incentives, rent controls and ownership restrictions can cause the two to diverge.
- tmnvix 3y ago
  Second homes, short term rentals, and land banked properties are not available to use as a primary residence but are part of the total housing stock. I call these underutilised properties and suspect that there are more than most suspect. Demand for purchasing these properties is not the same as demand for homes. That is what is often overlooked when people consider solutions to the accommodation crisis (i.e. usually happy to think no further than 'build more houses' without considering everything that pushes up demand).

randomdata 3y ago

The most reliable indicator of a shortage is abandonment of a price-based mechanism in favour of something else, like a lottery or needs-based selection. If price is able to select the buyer, then you can't possibly have a shortage.

chii 3y ago
> If price is able to select the buyer, then you can't possibly have a shortage. unless you cannot produce regardless of the price. This is sometimes called a market failure. And it recently did happen, during covid. A lot of goods went up in price - and even then unable to procure it regardless.
- randomdata 3y ago
  What do you mean unless? If no amount of money can produce something then you cannot select a buyer based on price. You have not found an exception. You're parroting the rule.
TulliusCicero 3y ago
That simply isn't the colloquial definition of a shortage. If rent is $20,000/month for a studio, going "well technically you can always get one if you can pay $20,000 a month so there's no shortage" is kind of a uselessly pedantic comment.
- randomdata 3y ago
  I agree, in the case of "rent is $20,000/month" calling that a "shortage" doesn't say anything. It is no different than a case where "rent is $200/month". There is nothing the reader/listener can learn by adding shortage into the mix in either case. Pointless, yes, but I'm not sure pedantic is the right term for describing using a word in a way that does not communicate anything. But, to each their own.
  - Dylan16807 3y ago
    You can set reasonable price benchmarks to define "shortage" by. Your definition of shortage is too narrow. Price is always able to select a buyer. People will skip eating if you give them enough money. But if that only supplies a couple percent of buyers, that's not going to disprove a shortage.

disgruntledphd2 3y ago

> In contrast, rents are a more reliable indicator of a shortage, no speculation there. You'd think so, wouldn't you? However, again the Irish market disproves this to some extent. So generally you look at rents as a 12-14 year payback window of the house price (for investment). What happened in Ireland in the last decade is that rents increased, such that investors could pay more for houses, which increased rents etc etc. Like, there's all this purpose built accommodation in Dublin that's sitting empty because they want 3k euro for a two bed apartment. For reference, a top 5% taxpayer would clear about 6-8k euro per month, so those prices are entirely out of whack with what people can afford. But because it's all private capital, it's mark to myth so many of these apartments are empty. I work near the Central Bank, and there's loads of gorgeous six-eight floor blocks of apartments, all of which are entirely empty while we have far too many homeless people.

chgs 3y ago
Number of empty properties in Ireland dropped by 9% from 2016 to 2022
- tmnvix 3y ago
  Interesting. Could you share a source?
  - ptrott2017 3y ago
    Not the OP but suspect the source is this: https://www.cso.ie/en/releasesandpublications/ep/p-cpr/censusofpopulation2022-preliminaryresults/housing/ https://www.cso.ie/en/releasesandpublications/ep/p-cpr/censu...
    - tmnvix 3y ago
      Thank you for this. It does clearly corroborate that figure of 9%. Still, 230,000 dwellings of 2,125,000 in total is a lot to be be vacant during an accommodation crisis. As I said elsewhere, the number of vacant dwellings is higher than most would suspect.

fasa99 3y ago

>In contrast, rents are a more reliable indicator of a shortage, no speculation there. Take a look at the Bay Area. One major distortion: property tax is fixed at the time of purchase. So all these people who bought a house in 1980 are paying yearly taxes at the 1980 rate. This compels people to hang onto the property at all costs, what a lucrative rental cash cow. Of course this also means tax revenue via property tax is skewed heavily to be paid for by new buyers. Imagine paying property tax on a 2 million dollar house, valued at 80K. This creates (a relative) oversupply in rental houses in the area due to people who intend to hang onto their homes forever. Naturally the area is very strong in NIMBYs seeking to retain home value, plus the political environment, is people who love the environment, so they will shed no tears if no houses are built in order to protect and preserve the pristine natural empty fields of the region. That's all to say the home buyer/seller dynamics in a region indirectly influence rental prices - vis a vis whether the person deciding to "not live in this house" chooses to simply sell the home or to rent it. This creates a little mini- supply/demand factor interacting with rental prices.