5 ms·

This is largely a good move. There are plenty of whales, once those 5% disappeared, price should slowly come down. ( The Hong Kong Housing market is the one wo

• john-h-k 10mo ago
  > There are plenty of whales, once those 5% disappeared, price should slowly come down But by how much? ~3-4% of housing has to be sold, some amount of it will still be bought for renting (as many people still want to rent). Surely this can’t have a very big effect on house price
  • bombcar 10mo ago
    It could be substantial just by increasing the number of occupied dwelling units - if institutional investors are willing to let housing sit empty for 6 months or a year (because it doesn't hit them where it hurts) and the average vacancy rate in a city is hovering around 10%, dropping that down to 5% will really shake up prices.
    • john-h-k 10mo ago
      If mega institutions are financial extractors who will take all money available, and the units can be rented to make more money, why aren’t they doing it? Why would the institution turn away free money but individuals owning the houses wouldn’t?
      • bombcar 10mo ago
        Because commercial real estate works on weird counter-intuitive things, and dropping rental rates adversely affects their entire portfolio more than leaving a building vacant does.
        • bombcar 10mo ago
          I should have mentioned a bit more - residential real estate (e.g., your house) is valued on comps for the purposes of a mortgage backed by that property alone - commercial real estate is valued by the local rent multiplier and mortgages are against bundles of it, or the entire company. So (simplified) an "empty building, but it rents at $2k a month" is valued at 200k say; if you drop the rent to $1500 and now are getting rent paid, the building is valued at $150k. They're not stupid, they're watching the vacancies and cash flow also, but it's over a bunch of properties, not just one. A single-family landlord who owns one property will start to feel the pain quite quickly of an empty building (and even they should plan for 20% vacancy, one year out of five).
          • john-h-k 10mo ago
            But … none of this is commercial real estate? It’s all single family homes
          • ksec 10mo ago
            This, and it is already happening in as we speak. London, Hong Kong, South Korea ( a little different but all the same ) Vancouver, Sydney. Basically anywhere you see housing bubble. The trigger of re-evaluation also hurts banks's balance sheet. Crediting Rating agency, a whole lots of other financial institution. i.e Their interest is to not let it fall.
            • john-h-k 10mo ago
              Banks? Banks don’t buy up houses, banks are what helps individuals buy houses. Again this just sounds like someone who recently watched the big short
              • ksec 10mo ago
                They together with property agency, owner, investors dont want to trigger re-evaluation because it hurts their LTV ( Loan-to-Value ). Which for a set percentage is defined by law along with adequate cash reserve. It is also what causes HSBC to buy its subsidiary HSB. And Bombcar above has already replied. It is rather obvious not something to do with big short but not understand how the financial world of property market works.
• h14h 10mo ago
  Given how inexorably tied the US economy is to SFH prices, a drop may do more harm than good. Many families have the majority of their wealth tied up in their home, and another significant portion of it (knowingly or not) in the SFH MBS market via their retirement investments. If prices fall quickly enough to impact the MBS market, a large number of households could suddenly see big dips their two biggest sources of wealth. A gradual drop may be fine, but the financialization of housing at the national is a big mess. Sadly it makes the market dynamics of giving people places to live way more complex than it should be.
  • bombcar 10mo ago
    You don't even need a drop; you just need prices to stay stable for a decade or so, and inflation will "drop" the real cost of new ownership.
    • ksec 10mo ago
      Exactly. I am so glad someone gets it. Or a drop of 3% per year. There are plenty of tools to use to help achieving this. The question is whether government have any intention to bring housing market to an affordable level.