5 ms·

International investment and local rules push prices up faster than supply

135 points by hhs 3mo ago

rho138 3mo ago
> An influx of foreign money during the 2010s drove up housing costs in the areas with the greatest concentrations of purchasers from outside the U.S., finds Caitlin Gorback, assistant professor of finance. This just in, water is wet.
- tasuki 3mo ago
  A friend of mine got a PhD in economics with "building a bridge across the fjord increased property prices on the other side of the fjord".
someperson 3mo ago
The US also drastically stopped constructing new houses after 2008
- Scoundreller 3mo ago
  Because they got cheaper for quite a while. Meanwhile vs Canada (turn on your ad blocker): https://awealthofcommonsense.com/2023/09/the-u-s-housing-market-vs-the-canadian-housing-market/ https://awealthofcommonsense.com/2023/09/the-u-s-housing-mar...
leonidasrup 3mo ago
All kinds of money: "Anyone who’s lived in London as long as I have can’t fail to notice that over the last 30 years, the city’s become awash with money. From the mid-90s onwards (the last time property was affordable to anyone on an average salary) shops have got more designer, cars faster, and property commands ever more eye-watering sums. Knightsbridge and Belgravia have become the playground of oligarchs and at the centre of it all — that temple to Mammon — stands Canary Wharf, home to banks, insurance companies and lawyers, gleaming on the London skyline, its shiny windows hiding shady deals. ‘Londongrad’, ‘Moscow-on-Thames’… That Russian money has been given a warm welcome in London is no secret. Over the last two decades, swathes of prime real estate in London and its surroundings have been bought by wealthy Russians looking for a safe haven for their cash, with few or no questions asked. " https://www.investigate-europe.eu/opinion/londongrad-a-citys-addiction-to-russian-oligarchs-and-easy-money https://www.investigate-europe.eu/opinion/londongrad-a-citys...
- esalman 3mo ago
  This. And it's not just the Russian oligarchs. In 2024 a corrupt government was toppled in Bangladesh. In subsequent investigations it was revealed that just one member of the cabinet had bought more than 200 luxury properties across US, UK, and UAE. The fact that the West welcomes black money from anybody and everybody causes both inflation to go up in the West and exploitation to prevail in less developed countries of the world.
  - leonidasrup 3mo ago
    "Nearly 40% of dirty money is laundered in London and UK crown dependencies" https://www.theguardian.com/world/article/2024/may/14/nearly-40-of-dirty-money-is-laundered-in-london-and-uk-crown-dependenies https://www.theguardian.com/world/article/2024/may/14/nearly...
ripley12 3mo ago
Awful headline and I doubt it's what the author would have chosen, given that her comments are much more to do with supply: > “In San Francisco, demand is reflected in increased prices,” she says. “In Charlotte, demand is reflected in increased quantities.” > “A big takeaway is that cities are in control of a big portion of their supply sensitivity,” Gorback says. “It’s cities that control zoning. It’s cities that control permitting. The real keeper of the keys are the municipalities.”
- kurthr 3mo ago
  Some 10-15% of San Francisco housing is unoccupied. The exact why and how to fix it are arguable, but I'm doubtful the investment is actually helping. https://www.pacificresearch.org/time-to-ask-why-so-many-san-francisco-homes-are-vacant/ https://www.pacificresearch.org/time-to-ask-why-so-many-san-...
  - BobbyJo 3mo ago
    When a good's supply is constrained, it becomes a store of value. See: gold. Strangely enough, if housing got built in response to price increases, there would likely be less unused housing, because it would be seen less as a way to store capital.
    - roenxi 3mo ago
      > When a good's supply is constrained, it becomes a store of value. See: gold. That doesn't make sense as stated, because every physical commodity is supply-constrained to some extent, even and especially the ones that are extremely bad stores of value. Picking on Fermium (it has a nice atomic number) - Fermium is supply constrained and it makes a horrible store of value because it rapidly morphs into something else. Gold is a well-liked store of value because it is absurdly stable (about as close as we can practically get to indestructible) and roughly the easiest to physically store out of all the durable candidates.
      - uniqueusername7 3mo ago
thelastgallon 3mo ago
Housings (US) greatest feature is money laundering: https://globalwitness.org/en/campaigns/corruption-and-money-laundering/on-the-house/ https://globalwitness.org/en/campaigns/corruption-and-money-... Most countries have residency by investment programs. Invest in real estate, prop up residential home pricing by injection wealthy foreigner/criminal money. Which imo is pretty idiotic.
- bawana 3mo ago
  esp in the Caribbean.If the FBI wants to find criminals, their short list of suspects should include Caribbean CBI applicants.
- the_why_of_y 3mo ago
  Congress did improve the situation with the Corporate Transparency Act in 2020, but then Trump became president again and simply announced that the law will no longer be enforced, and now what is left of the Republican party wants to repeal it altogether. https://newrepublic.com/article/211855/republicans-making-world-safe-kleptocrats https://newrepublic.com/article/211855/republicans-making-wo...
ggm 3mo ago
True or not, there is little doubt demagogues play on foreign capital when arguing about house ownership costs to the mostly young renting classes. My own belief is that at national scale the % of foreign capital in housing stock for most western democratic states is low, and when it exists in scale its things like the Canadian teachers pension fund or .. Blackstone. In America, I suspect it's Blackstone before foreigners.
- jjk166 3mo ago
  The problem is real estate can not be looked at on a national scale. It is fundamentally local. In a country like the US, probably 95%+ of the land is absolutely worthless as an investment. You can get a residential plot in North Dakota for like $5k. But owning a very small portion of a country can have an extreme influence if it's that part of a country that people seek to live in. Further, the overwhelming majority of real estate in any given area is typically occupied by someone who has no interest in selling soon. Only about 3-4% of US homes are on the market at any given time. If an entity bought up every home on the market in the Bay area, they'd own a measly 0.009% of the US real estate market in terms of housing units, but they would be able to unilaterally set the price of housing for over 2% of the US population and over 4% of the US economy.
zarzavat 3mo ago
The US is special insofar as the US stock market is extraordinarily safe with many options for value investing. In much of the rest of the world it's the reverse: domestic stocks are risky and it's real estate, land and gold that are the safe, prestige assets. When you add in an unstable environment at home, this mentality leads to foreign real estate being perceived as the ultimate asset. It's perception rather than reality because foreign real estate is not exactly a good investment, especially if non-resident: it's illiquid, highly taxed, requires insurance, is easy to confiscate, etc.
derriz 3mo ago
I would have imagined that an influx of any type of money - not just foreign money - into a market with limited supply growth would push up prices. Probably I am getting overly sensitive about what seems to be creeping casual xenophobia even in mainstream media. The way the story is presented, the sketchy “foreign” aspect of the money is apparently central to it having this undesirable outcome.
deleted 3mo ago
[deleted]
carlosjobim 3mo ago
Housing is globally unaffordable in the entire industrialized world. Everybody knows why, but people are desperately looking for scapegoats because the truth is too uncomfortable. The people to blame can easily be found among your own family and friends. It might even be you yourself. It is probably your parents. Everybody who works for a living has relatives who have become wealthy by real estate value appreciation. If they're your parents or grandparents, they most probably earn as much yearly from real estate appreciation doing nothing as you do by working full time and being fully taxed for your hard labour. If they're your uncle and aunt who are still working, then they have a completely different life from a renter working full time, even if it's the same job. Your money as a renter is gone into a black hole, while their money goes into paying off their lucrative real estate or into a very comfortable life if it's already paid off. Unless they are ambitious, they will stay working for whatever salary, keeping salaries from growing. Because they need the stable income. They have no reason to put any effort into a career, since that same effort pays much more being put into real estate. Outside of the USA any full time working expert in his field can never earn as much per hour in wages in any job as he will earn in real estate value increase by doing home renovations - even if he has no skills in home renovations. Even if he is the leading expert in his field in his nation. People will look for scapegoats; billionaires, foreign investors, expats. There are dozens of countries with no billionaires, no foreign investments and no rich expats who have a housing crisis. You know that billionaires aren't the problem. If you have a large percentage of your population who do not work, or who work pretend jobs, or who work real jobs but just at part of their capacity, then it's no surprise that the rest of the population has to work hard to compensate for them. Everything around us is the result of hard work, and if somebody is living comfortably without working that means somebody else is providing for them. Food on their plate doesn't come from the job they worked 30 years ago. It comes from somebody working today. The same for everything. Until people start admitting what's going on, the problem won't be solved. It's a deliberately created problem by tying the money supply to housing as an effort to decrease the population. Now we're seeing population collapse and total destruction of the industrialized world for the limitless greed of the current old generation. The near future will be very different than what people now are used to. We're already seeing changes and should talk about them instead of pretending and telling lies.
- 3mo ago
dougSF70 3mo ago
A finding that could be twisted by the current administration to support their claim that immigration increases the cost of housing...except its not the type of immigration they want to limit!
imtringued 3mo ago
The US has a trade deficit, that means other countries are increasingly holding foreign reserves denominated in USD. To balance the money flow, the US has to sell its capital stock to the countries it is importing from, which includes the housing stock. Usually this would be welcomed for housing, because e.g. the Chinese are funding local housing construction at ridiculous prices but Americans hate each other so they try to pull up each other's ladder.

135 points by hhs 3mo ago

> An influx of foreign money during the 2010s drove up housing costs in the areas with the greatest concentrations of purchasers from outside the U.S., finds Caitlin Gorback, assistant professor of finance. This just in, water is wet.

tasuki 3mo ago
A friend of mine got a PhD in economics with "building a bridge across the fjord increased property prices on the other side of the fjord".

someperson 3mo ago

The US also drastically stopped constructing new houses after 2008

Scoundreller 3mo ago
Because they got cheaper for quite a while. Meanwhile vs Canada (turn on your ad blocker): https://awealthofcommonsense.com/2023/09/the-u-s-housing-market-vs-the-canadian-housing-market/ https://awealthofcommonsense.com/2023/09/the-u-s-housing-mar...

leonidasrup 3mo ago

All kinds of money: "Anyone who’s lived in London as long as I have can’t fail to notice that over the last 30 years, the city’s become awash with money. From the mid-90s onwards (the last time property was affordable to anyone on an average salary) shops have got more designer, cars faster, and property commands ever more eye-watering sums. Knightsbridge and Belgravia have become the playground of oligarchs and at the centre of it all — that temple to Mammon — stands Canary Wharf, home to banks, insurance companies and lawyers, gleaming on the London skyline, its shiny windows hiding shady deals. ‘Londongrad’, ‘Moscow-on-Thames’… That Russian money has been given a warm welcome in London is no secret. Over the last two decades, swathes of prime real estate in London and its surroundings have been bought by wealthy Russians looking for a safe haven for their cash, with few or no questions asked. " https://www.investigate-europe.eu/opinion/londongrad-a-citys-addiction-to-russian-oligarchs-and-easy-money https://www.investigate-europe.eu/opinion/londongrad-a-citys...

esalman 3mo ago
This. And it's not just the Russian oligarchs. In 2024 a corrupt government was toppled in Bangladesh. In subsequent investigations it was revealed that just one member of the cabinet had bought more than 200 luxury properties across US, UK, and UAE. The fact that the West welcomes black money from anybody and everybody causes both inflation to go up in the West and exploitation to prevail in less developed countries of the world.
- leonidasrup 3mo ago
  "Nearly 40% of dirty money is laundered in London and UK crown dependencies" https://www.theguardian.com/world/article/2024/may/14/nearly-40-of-dirty-money-is-laundered-in-london-and-uk-crown-dependenies https://www.theguardian.com/world/article/2024/may/14/nearly...

ripley12 3mo ago

Awful headline and I doubt it's what the author would have chosen, given that her comments are much more to do with supply: > “In San Francisco, demand is reflected in increased prices,” she says. “In Charlotte, demand is reflected in increased quantities.” > “A big takeaway is that cities are in control of a big portion of their supply sensitivity,” Gorback says. “It’s cities that control zoning. It’s cities that control permitting. The real keeper of the keys are the municipalities.”

kurthr 3mo ago
Some 10-15% of San Francisco housing is unoccupied. The exact why and how to fix it are arguable, but I'm doubtful the investment is actually helping. https://www.pacificresearch.org/time-to-ask-why-so-many-san-francisco-homes-are-vacant/ https://www.pacificresearch.org/time-to-ask-why-so-many-san-...
- BobbyJo 3mo ago
  When a good's supply is constrained, it becomes a store of value. See: gold. Strangely enough, if housing got built in response to price increases, there would likely be less unused housing, because it would be seen less as a way to store capital.
  - roenxi 3mo ago
    > When a good's supply is constrained, it becomes a store of value. See: gold. That doesn't make sense as stated, because every physical commodity is supply-constrained to some extent, even and especially the ones that are extremely bad stores of value. Picking on Fermium (it has a nice atomic number) - Fermium is supply constrained and it makes a horrible store of value because it rapidly morphs into something else. Gold is a well-liked store of value because it is absurdly stable (about as close as we can practically get to indestructible) and roughly the easiest to physically store out of all the durable candidates.
    - uniqueusername7 3mo ago

thelastgallon 3mo ago

Housings (US) greatest feature is money laundering: https://globalwitness.org/en/campaigns/corruption-and-money-laundering/on-the-house/ https://globalwitness.org/en/campaigns/corruption-and-money-... Most countries have residency by investment programs. Invest in real estate, prop up residential home pricing by injection wealthy foreigner/criminal money. Which imo is pretty idiotic.

bawana 3mo ago
esp in the Caribbean.If the FBI wants to find criminals, their short list of suspects should include Caribbean CBI applicants.
the_why_of_y 3mo ago
Congress did improve the situation with the Corporate Transparency Act in 2020, but then Trump became president again and simply announced that the law will no longer be enforced, and now what is left of the Republican party wants to repeal it altogether. https://newrepublic.com/article/211855/republicans-making-world-safe-kleptocrats https://newrepublic.com/article/211855/republicans-making-wo...

ggm 3mo ago

True or not, there is little doubt demagogues play on foreign capital when arguing about house ownership costs to the mostly young renting classes. My own belief is that at national scale the % of foreign capital in housing stock for most western democratic states is low, and when it exists in scale its things like the Canadian teachers pension fund or .. Blackstone. In America, I suspect it's Blackstone before foreigners.

jjk166 3mo ago
The problem is real estate can not be looked at on a national scale. It is fundamentally local. In a country like the US, probably 95%+ of the land is absolutely worthless as an investment. You can get a residential plot in North Dakota for like $5k. But owning a very small portion of a country can have an extreme influence if it's that part of a country that people seek to live in. Further, the overwhelming majority of real estate in any given area is typically occupied by someone who has no interest in selling soon. Only about 3-4% of US homes are on the market at any given time. If an entity bought up every home on the market in the Bay area, they'd own a measly 0.009% of the US real estate market in terms of housing units, but they would be able to unilaterally set the price of housing for over 2% of the US population and over 4% of the US economy.

zarzavat 3mo ago

The US is special insofar as the US stock market is extraordinarily safe with many options for value investing. In much of the rest of the world it's the reverse: domestic stocks are risky and it's real estate, land and gold that are the safe, prestige assets. When you add in an unstable environment at home, this mentality leads to foreign real estate being perceived as the ultimate asset. It's perception rather than reality because foreign real estate is not exactly a good investment, especially if non-resident: it's illiquid, highly taxed, requires insurance, is easy to confiscate, etc.

derriz 3mo ago

I would have imagined that an influx of any type of money - not just foreign money - into a market with limited supply growth would push up prices. Probably I am getting overly sensitive about what seems to be creeping casual xenophobia even in mainstream media. The way the story is presented, the sketchy “foreign” aspect of the money is apparently central to it having this undesirable outcome.

deleted 3mo ago

[deleted]

carlosjobim 3mo ago

Housing is globally unaffordable in the entire industrialized world. Everybody knows why, but people are desperately looking for scapegoats because the truth is too uncomfortable. The people to blame can easily be found among your own family and friends. It might even be you yourself. It is probably your parents. Everybody who works for a living has relatives who have become wealthy by real estate value appreciation. If they're your parents or grandparents, they most probably earn as much yearly from real estate appreciation doing nothing as you do by working full time and being fully taxed for your hard labour. If they're your uncle and aunt who are still working, then they have a completely different life from a renter working full time, even if it's the same job. Your money as a renter is gone into a black hole, while their money goes into paying off their lucrative real estate or into a very comfortable life if it's already paid off. Unless they are ambitious, they will stay working for whatever salary, keeping salaries from growing. Because they need the stable income. They have no reason to put any effort into a career, since that same effort pays much more being put into real estate. Outside of the USA any full time working expert in his field can never earn as much per hour in wages in any job as he will earn in real estate value increase by doing home renovations - even if he has no skills in home renovations. Even if he is the leading expert in his field in his nation. People will look for scapegoats; billionaires, foreign investors, expats. There are dozens of countries with no billionaires, no foreign investments and no rich expats who have a housing crisis. You know that billionaires aren't the problem. If you have a large percentage of your population who do not work, or who work pretend jobs, or who work real jobs but just at part of their capacity, then it's no surprise that the rest of the population has to work hard to compensate for them. Everything around us is the result of hard work, and if somebody is living comfortably without working that means somebody else is providing for them. Food on their plate doesn't come from the job they worked 30 years ago. It comes from somebody working today. The same for everything. Until people start admitting what's going on, the problem won't be solved. It's a deliberately created problem by tying the money supply to housing as an effort to decrease the population. Now we're seeing population collapse and total destruction of the industrialized world for the limitless greed of the current old generation. The near future will be very different than what people now are used to. We're already seeing changes and should talk about them instead of pretending and telling lies.

3mo ago

dougSF70 3mo ago

A finding that could be twisted by the current administration to support their claim that immigration increases the cost of housing...except its not the type of immigration they want to limit!

imtringued 3mo ago

The US has a trade deficit, that means other countries are increasingly holding foreign reserves denominated in USD. To balance the money flow, the US has to sell its capital stock to the countries it is importing from, which includes the housing stock. Usually this would be welcomed for housing, because e.g. the Chinese are funding local housing construction at ridiculous prices but Americans hate each other so they try to pull up each other's ladder.