5 ms·

Asian countries have a lot more people and build a lot more housing.

seanmcdirmid 2y ago
And yet housing prices in much of Asia is still insane. The only market that is sane is sort of Japan with a falling population and an aversion to property speculation due to getting burned on their last property bubble. Chinese housing market is completely messed up, with turn over almost halted since the government won’t let prices fall no matter what, while they have overbuilt like crazy.
- AnthonyMouse 2y ago
  > And yet housing prices in much of Asia is still insane. They're generally lower than the US, despite having a higher population density. > Chinese housing market is completely messed up, with turn over almost halted since the government won’t let prices fall no matter what, while they have overbuilt like crazy. A place with the government policy objective of not allowing housing prices to decrease isn't much of an argument that supply and demand doesn't work in general. China is just its own kind of broken. Whereas prices are significantly lower in e.g. India, not just Japan.
  - seanmcdirmid 2y ago
    They are only lower in the sense that incomes are lower, and often not even that much lower than American cities even if incomes are ten times less. India, for example, if you take median home prices and median incomes, they don’t match at all. Yes, an American moving to India who retains an American salary somehow will find it affordable. The locals are struggling, much more than Americans could ever imagine. Japan housing wins by being smaller, and having less requirements like central heating, that would never fly in the west. We really should have that lower end housing, I agree, but then we are comparing apples to Orenjis. China is simply repeating what Japan went through in the 80s/90s. Maybe market sanity comes only after a period of crazy insanity.
    - AnthonyMouse 2y ago
      > They are only lower in the sense that incomes are lower The urge to measure everything by income leads to absurd results, like putting Saudi Arabia and the UAE near the top of the "housing affordability" list because they're flush with oil money, and for the same reason the United States. > We really should have that lower end housing, I agree, but then we are comparing apples to Orenjis. But that's the point. Someone in the US who makes 20% of the median household income still needs somewhere to live, and by refusing to provide smaller units, we make things cost more for everyone else too. Because now they have to spend their entire salary on housing and make up the rest with government assistance, which bids up housing costs for people in the middle -- who are also the ones footing the bill for subsidies made necessary by the high costs. It's not just about the cost per square foot, it's also that small units aren't even available because the rules proscribe more units from being built on the same lot. The result is a de facto prohibition on smaller units because ordinarily it costs a similar amount to build a small number of large units and a large number of small units, but now the latter is unlawful and a small number of small units is uneconomical.
      - seanmcdirmid 2y ago
        > The urge to measure everything by income leads to absurd results If you believe housing is for people to live while doing the work they can get at the salaries those jobs are willing to pay them, then it is absurd not to consider income in housing affordability.
        geodel 2y ago
        Exactly right. Ignoring income of local buyers in market would be ridiculous. My family bought an apartment couple of hrs from Delhi for about $100K which is huge amount for locals considering it is center/ hub of nothing. And as far as fit/finish goes one can easily spend another $50K on it to bring it barely to level of basic rental apartment in US.
        AnthonyMouse 2y ago
        If it costs e.g. $200,000/unit to create a housing as 5-story buildings then housing should not cost more than $200,000 anywhere that isn't already saturated with 5-story buildings (which includes every metropolitan area in the US), regardless of what local salaries are. Only regulatory rules that constrain construction prevent this from being the case. There is a minimum amount that it intrinsically costs to create housing, e.g. the cost of lumber, and in some places local wages are too low to afford that, and that sucks but the reason for it is low wages rather than housing scarcity. Then there are places where housing is unaffordable, not because wages are low, but because housing costs are artificially high, and that is a different problem with a different solution.
  - munksbeer 2y ago
    > Whereas prices are significantly lower in e.g. India I don't think so. Ask any indians about the cost of buying a property in eg. Mumbai. This really is a global phenomenon. I don't know where the reluctance to admit that comes from (not you specifically, but in general).
    - AnthonyMouse 2y ago
      > This really is a global phenomenon. It's global in the sense that it's present in multiple countries, often for the same reasons. For example, the costs are high in the UK for similar reasons as in the US. But many of the comparisons just don't apply. If you look at a country with a very low median income, of course housing costs a lot compared to the median income -- everything costs a lot compared to the median income. And housing in particular requires skilled labor and global commodities like timber and steel, which put a floor on the cost regardless of what local incomes are. So housing in India or Vietnam costs a lot relative to local incomes because wood costs a lot relative to local incomes, even though housing there doesn't cost a lot in absolute terms. Which is not the problem in San Francisco, is it?
      - munksbeer 2y ago
        It is more than that. In the UK we track this through a figure called HPI (house price inflation). It just means the cost of real estate. My guess is that the graph would look quite similar for most non war ravaged countries around the world. Rocketing HPI over the last few decades. There is more to it than just "anglo countries don't build enough".
        AnthonyMouse 2y ago
        There are more components to housing prices than just not building enough, but in ordinary markets that aren't constrained by pathological factors (e.g. China), supply and demand operates and increasing supply lowers prices. For example, suppose you don't have artificial supply constraints and then you lower interest rates. No problem, more people can get a loan to buy a house which causes more houses to be built and them more people get to be homeowners. But long-term prices stay the same, because it's easy to add supply, so it keeps getting added until prices fall to the construction costs, which acts as a long-term ceiling on prices. Now suppose you do have artificial supply constraints. Prices are at $200,000 but you've made it cost $1,000,000 to create a new housing unit. Now if you lower interest rates, prices are going to go up, because you can't increase supply at the current price so people just end up having to outbid each other on the existing supply. And the same thing if local demand increases or anything else like that, because you've prevented supply from responding to demand until prices hit a million dollars. But the problem isn't low interest rates or growing cities or anything like that, because the only reason those things are a problem is that supply can't increase until prices are unaffordable.
- Aunche 2y ago
  The difference is that China had a housing bubble. After it popped, housing prices started plummeting. In the US, housing is just expensive. Given the current supply and demand, there isn't a good reason why the price should be lower.
  - seanmcdirmid 2y ago
    > After it popped, housing prices started plummeting. Prices haven't plummeted in China. Sales volume has seized since the red families control the real estate agencies. They have added more incentives, like easier access to hukou, and have eliminated limits on how many homes you can buy.
    - Aunche 2y ago
      The government is doing everything they can stop it, but home prices are indeed falling [1]. A 2.2% decline doesn't sound like much, but it's wild given the strong GDP growth over the same period. https://www.reuters.com/world/china/chinas-new-home-prices-decline-fastest-pace-since-2015-2024-04-16/ https://www.reuters.com/world/china/chinas-new-home-prices-d...
      - seanmcdirmid 2y ago
        I wouldn't take much credence in reported GDP growth. Tearing down a building that was built last year creates reported GDP. Also, you really really need to look at volume, since the party will just cut off sales if they have to (since they control the real estate agencies).
- ameister14 2y ago
  Chinese municipal governments are funded through the tax assessed on the sale of the home and not through a continuous property tax - or at least that used to be the case, haven't checked in a while. That resulted in municipalities encouraging higher prices for housing.
  - seanmcdirmid 2y ago
    Some locales have experimented with property tax, but they haven't really expanded the program yet, and they usually exempt your first home. It isn't enough to fund municipal services, and cities are still screwed when it comes to income (the central government collects most of their VAT, they are expected to pay for a lot of services without a lot of income beyond taxes on property sales).

And yet housing prices in much of Asia is still insane. The only market that is sane is sort of Japan with a falling population and an aversion to property speculation due to getting burned on their last property bubble. Chinese housing market is completely messed up, with turn over almost halted since the government won’t let prices fall no matter what, while they have overbuilt like crazy.

AnthonyMouse 2y ago
> And yet housing prices in much of Asia is still insane. They're generally lower than the US, despite having a higher population density. > Chinese housing market is completely messed up, with turn over almost halted since the government won’t let prices fall no matter what, while they have overbuilt like crazy. A place with the government policy objective of not allowing housing prices to decrease isn't much of an argument that supply and demand doesn't work in general. China is just its own kind of broken. Whereas prices are significantly lower in e.g. India, not just Japan.
- seanmcdirmid 2y ago
  They are only lower in the sense that incomes are lower, and often not even that much lower than American cities even if incomes are ten times less. India, for example, if you take median home prices and median incomes, they don’t match at all. Yes, an American moving to India who retains an American salary somehow will find it affordable. The locals are struggling, much more than Americans could ever imagine. Japan housing wins by being smaller, and having less requirements like central heating, that would never fly in the west. We really should have that lower end housing, I agree, but then we are comparing apples to Orenjis. China is simply repeating what Japan went through in the 80s/90s. Maybe market sanity comes only after a period of crazy insanity.
  - AnthonyMouse 2y ago
    > They are only lower in the sense that incomes are lower The urge to measure everything by income leads to absurd results, like putting Saudi Arabia and the UAE near the top of the "housing affordability" list because they're flush with oil money, and for the same reason the United States. > We really should have that lower end housing, I agree, but then we are comparing apples to Orenjis. But that's the point. Someone in the US who makes 20% of the median household income still needs somewhere to live, and by refusing to provide smaller units, we make things cost more for everyone else too. Because now they have to spend their entire salary on housing and make up the rest with government assistance, which bids up housing costs for people in the middle -- who are also the ones footing the bill for subsidies made necessary by the high costs. It's not just about the cost per square foot, it's also that small units aren't even available because the rules proscribe more units from being built on the same lot. The result is a de facto prohibition on smaller units because ordinarily it costs a similar amount to build a small number of large units and a large number of small units, but now the latter is unlawful and a small number of small units is uneconomical.
    - seanmcdirmid 2y ago
      > The urge to measure everything by income leads to absurd results If you believe housing is for people to live while doing the work they can get at the salaries those jobs are willing to pay them, then it is absurd not to consider income in housing affordability.
      - geodel 2y ago
        Exactly right. Ignoring income of local buyers in market would be ridiculous. My family bought an apartment couple of hrs from Delhi for about $100K which is huge amount for locals considering it is center/ hub of nothing. And as far as fit/finish goes one can easily spend another $50K on it to bring it barely to level of basic rental apartment in US.
      - AnthonyMouse 2y ago
        If it costs e.g. $200,000/unit to create a housing as 5-story buildings then housing should not cost more than $200,000 anywhere that isn't already saturated with 5-story buildings (which includes every metropolitan area in the US), regardless of what local salaries are. Only regulatory rules that constrain construction prevent this from being the case. There is a minimum amount that it intrinsically costs to create housing, e.g. the cost of lumber, and in some places local wages are too low to afford that, and that sucks but the reason for it is low wages rather than housing scarcity. Then there are places where housing is unaffordable, not because wages are low, but because housing costs are artificially high, and that is a different problem with a different solution.
- munksbeer 2y ago
  > Whereas prices are significantly lower in e.g. India I don't think so. Ask any indians about the cost of buying a property in eg. Mumbai. This really is a global phenomenon. I don't know where the reluctance to admit that comes from (not you specifically, but in general).
  - AnthonyMouse 2y ago
    > This really is a global phenomenon. It's global in the sense that it's present in multiple countries, often for the same reasons. For example, the costs are high in the UK for similar reasons as in the US. But many of the comparisons just don't apply. If you look at a country with a very low median income, of course housing costs a lot compared to the median income -- everything costs a lot compared to the median income. And housing in particular requires skilled labor and global commodities like timber and steel, which put a floor on the cost regardless of what local incomes are. So housing in India or Vietnam costs a lot relative to local incomes because wood costs a lot relative to local incomes, even though housing there doesn't cost a lot in absolute terms. Which is not the problem in San Francisco, is it?
    - munksbeer 2y ago
      It is more than that. In the UK we track this through a figure called HPI (house price inflation). It just means the cost of real estate. My guess is that the graph would look quite similar for most non war ravaged countries around the world. Rocketing HPI over the last few decades. There is more to it than just "anglo countries don't build enough".
      - AnthonyMouse 2y ago
        There are more components to housing prices than just not building enough, but in ordinary markets that aren't constrained by pathological factors (e.g. China), supply and demand operates and increasing supply lowers prices. For example, suppose you don't have artificial supply constraints and then you lower interest rates. No problem, more people can get a loan to buy a house which causes more houses to be built and them more people get to be homeowners. But long-term prices stay the same, because it's easy to add supply, so it keeps getting added until prices fall to the construction costs, which acts as a long-term ceiling on prices. Now suppose you do have artificial supply constraints. Prices are at $200,000 but you've made it cost $1,000,000 to create a new housing unit. Now if you lower interest rates, prices are going to go up, because you can't increase supply at the current price so people just end up having to outbid each other on the existing supply. And the same thing if local demand increases or anything else like that, because you've prevented supply from responding to demand until prices hit a million dollars. But the problem isn't low interest rates or growing cities or anything like that, because the only reason those things are a problem is that supply can't increase until prices are unaffordable.
Aunche 2y ago
The difference is that China had a housing bubble. After it popped, housing prices started plummeting. In the US, housing is just expensive. Given the current supply and demand, there isn't a good reason why the price should be lower.
- seanmcdirmid 2y ago
  > After it popped, housing prices started plummeting. Prices haven't plummeted in China. Sales volume has seized since the red families control the real estate agencies. They have added more incentives, like easier access to hukou, and have eliminated limits on how many homes you can buy.
  - Aunche 2y ago
    The government is doing everything they can stop it, but home prices are indeed falling [1]. A 2.2% decline doesn't sound like much, but it's wild given the strong GDP growth over the same period. https://www.reuters.com/world/china/chinas-new-home-prices-decline-fastest-pace-since-2015-2024-04-16/ https://www.reuters.com/world/china/chinas-new-home-prices-d...
    - seanmcdirmid 2y ago
      I wouldn't take much credence in reported GDP growth. Tearing down a building that was built last year creates reported GDP. Also, you really really need to look at volume, since the party will just cut off sales if they have to (since they control the real estate agencies).
ameister14 2y ago
Chinese municipal governments are funded through the tax assessed on the sale of the home and not through a continuous property tax - or at least that used to be the case, haven't checked in a while. That resulted in municipalities encouraging higher prices for housing.
- seanmcdirmid 2y ago
  Some locales have experimented with property tax, but they haven't really expanded the program yet, and they usually exempt your first home. It isn't enough to fund municipal services, and cities are still screwed when it comes to income (the central government collects most of their VAT, they are expected to pay for a lot of services without a lot of income beyond taxes on property sales).