11 ms·

How I won the housing market without trying

69 points by sasvari 12y ago

harkyns_castle 12y ago
Be nice to have got into the market early, many people over here in Australia get the benefit of negative gearing too as they accumulate more houses. I'd particularly be worried as a young person in the States now, a hefty mortgage on top of some of the student loans I've seen look like it'd spell an entire lifetime of loan repayments.
nodata 12y ago
I don't get it: she sold up and made a profit, but unless she downsized, the profit is gone on buying a new place.
- joosters 12y ago
  The article does say that she downsized, with about £200k difference in price. There's the profit!
- henrik_w 12y ago
  Yes. Usually when you sell one house, you buy another, so it is a bit of a zero-sum game. However, what does matter is when you entered the market. Entering the housing market today is relatively speaking much more expensive than it was 20 years ago.
- makomk 12y ago
  If you get lucky and don't particularly care where you live, you don't necessarily have to downsize. London house prices are a lot higher than the rest of the country and have gone up a lot more. You could get a decent-sized house with a garden in most of the UK for what she sold her flat for.
  - UK-AL 12y ago
    You could buy a McMansion in most of the UK for that price.
- jeffwass 12y ago
  Or you upgrade to a bigger house, and roll the profits into a bigger down payment on the next property, keeping a similar sized mortgage. My friend did this, sold his old place and bought a bigger nicer house, keeping his monthly mortgage payment roughly the same, which now is well below market rent.
  - onion2k 12y ago
    Except as all equivalent property prices have also gone up, and consequently the price differential between a flat and a house has probably led to a bigger gap in the prices than than the profit than the flat in 1995 and 2015. Eg £32,000 flat in 1995 -> £660,000 flat in 2015 is an increase of 2062%, or £628,000. £100,000 house in 1995 increasing at the same rate of 2062% now costs £2,062,000, up by £1,962,000. To move from the flat to the house you now need to find that additional £1,962,000. Obviously not all properties increase at the same rate, and presumably the author of the article got a quite lucky with her 2062% increase. But even if the house only increased at half the rate of her flat it still costs £1,000,000 now, so she's £300,000 short. Price increases only benefit you if the lower end moves up faster than the higher end (which is very rare) or if you're cashing out.
- frobozz 12y ago
  It isn't so much about the profit from sale, but about being able to buy in the first place. 10 years after graduation, she bought a two-bed flat in Herne Hill. Such a place wouldn't leave much change from £600K today. For context. Assuming a 3-year course and no gap year, that would make her 31 when she bought. Were she in the same position today, she'd need to have saved up at least £60K for a deposit (90% LTV) and have a salary of £135K (4x is a common salary multiplier). Given that that's more than a top decile _couple_ in London currently earns, that's not likely. The average salary today for her job at the time, is less than £24K, less than a fifth of what she would need. Given the high cost of private rent, and the fact that social housing is only available for existing tenants and people who _really_ need it, saving up that much in only 9 years is difficult. Meanwhile, house prices continue to rise faster than incomes, the longer you wait, hoping for a crash, the less likely it looks that you'll be able to afford a place even after the crash happens. Even as a direct response to your point, moving out of London makes your money go much further. With that money, you could get a pretty nice house even as close to London as Reading, Maidenhead or even the outer London Boroughs. Not to mention what you could do with the money if you moved away from the south east entirely. At an estimated 61 years old, she's in a position to think about retiring soon, and considering she's not from London, she might well be considering moving away when she no longer needs to be here for work. http://www.zoopla.co.uk/for-sale/property/london/dulwich-road/ http://www.zoopla.co.uk/for-sale/property/london/dulwich-roa... http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-salary-compare http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-... http://www.payscale.com/research/UK/Job=Communications_Officer/Salary http://www.payscale.com/research/UK/Job=Communications_Offic...
awjr 12y ago
In the UK it's normal practice to get in a chain. You sell yours, line up the one you want to buy, and all 14 people in the chain complete on the same day. Not sure you should be selling your house, then deciding to look. You have to ask yourself what changed in the UK mortgage market to create this increase in housing value. It comes down to a bank regulation change the government put in place in 1996. Banks were able to offer buy-to-let mortgages. This has fundamentally distorted the housing market in the UK. In London you also have another issue. Apparently 40% of new build apartments are bought and never lived in. They are used as an investment to hold money 'safely' primarily by foreign buyers. [EDIT] Citation for "buy to leave" http://www.theguardian.com/business/2014/dec/04/property-investors-islington-london-homes-empty-jail http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islington-council-buy-to-leave-investors-uk-housing http://www.theguardian.com/commentisfree/2014/dec/08/islingt... So you have a situation where the Banks leant like crazy inflating the housing market, the crash happened, the banks hardened their mortgage lending criteria, which forced most people into renting, enabling landlords to maximise returns and invest further in rental properties using buy to let mortgages that use rental income as part of the payment calculation. It's one hell of a vicious circle. From my point of view I have benefited, but I honestly cannot see my 11 year old daughter ever owning her own property.
- CmonDev 12y ago
  I thought a major reason was Thatcher letting people who should not be owning a house buy one at a cut price?
  - matthewmacleod 12y ago
    No - 'right to buy' is not related to the UK's housing crisis, aside from the fact it depleted social housing stock (which is a separate issue that should not have been allowed to happen). Offering cut-price sales of social property to council tenants is an amazingly powerful tool for giving people ownership over their communities.
    - pjc50 12y ago
vacri 12y ago
A couple of things are worth mentioning. Firstly, everything but housing is much cheaper now than in the 80s/90s. People will spend their money somewhere. The ability to do your own repairs is also much greater, as the huge (and cheap!) hardware stores have sprung up and the DIY culture has become stronger. Secondly, I don't know about the UK, but here in Australia, home loans in the 80s had interest rates of almost 20%, as opposed to 5-6% today. It had calmed a little in the 90s though. The cost in dollar terms was much cheaper, sure, but it was still difficult to service at the time. Buying a house was still monumentally stressful. I know a few boomers who were unable to maintain their mortgages in that time. Just because the sticker price was significantly smaller doesn't mean that it was all that much easier. Edit: it's also worth mentioning that the median wage in the UK has increased about 50% from 1990 to 2010 (~16k to ~24k) and the average wage more than that. Housing is still depressingly expensive, but the numbers aren't quite so wildly different as shown.
- nl 12y ago
  here in Australia, home loans in the 80s had interest rates of almost 20%, as opposed to 5-6% today. That's a pretty big exaggeration. Rates peaked at 17% in 1989, but were below 15% for most of the 80's[1]. [1] http://www.loansense.com.au/historical-rates.html http://www.loansense.com.au/historical-rates.html
  - tonylemesmer 12y ago
    Individual loan products from lenders would have been slightly different to rate shown in the graph. So "almost 20%" isn't that far off.
    - nl 12y ago
      I'm old enough to remember rates in the 80's (though not old enough to have had one!). And I have a loan now, and the rates almost exactly match the rates in that table. Here's another reference: http://www.abc.net.au/news/2007-08-08/the-reality-of-interest-rates/2525330 http://www.abc.net.au/news/2007-08-08/the-reality-of-interes... 17% was as high as they got for mortgages.
junto 12y ago
What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have crashed big time (2001, 2008), the BoE has propped it up by making sure that borrowing remained dirt cheap and the government made sure that the market stayed liquid (raising stamp duty levels for example). Every time they do this, they just exacerbate the problem long term, which is quite simply, that the market needs a correction, and the longer they put it off, the more painful the correction is going to be (like it was early 1990's in the UK but worse). I for one say let it burn.
- brianmcc 12y ago
  In many places in the UK, it did crash big time. Plenty of people I know even today are in homes well below their 2007 levels or have sold for painful losses. London is unusual in that many properties sell for cash, to investors, and in fact the BoE and mortgage lenders have surprisingly little influence in terms of rate changes. Not sure letting anything "burn" particularly helps anybody. Edit: I suspect "let it burn" reflects a certain frustration, you have my sympathy if you or your family/friends are finding the situation a barrier. Facts and figures can mask the very personal cost of being unable to achieve fundamental goals in life such putting down roots for one's family.
  - awjr 12y ago
    My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)
    - jgraham 12y ago
      The data doesn't seem to support that view [1]. The headline claim there is that average property prices across the country rose by 7% last year, with London more than double that and no area showing an annual fall. It seems like your example of Bristol is only becoming cheaper relative to London, not cheaper in any absolute sense. [1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/398604/December_HPI-2014.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...
buro9 12y ago
I saw a startup tweeting yesterday about a shared investment. The gist is that instead of investing in stocks and shares, you put your money into property and a shared structure gives you some % of the property in question. The startup actually owns the property, and there is some legal allocation of your portion, and they offer the means to exit your share of a property without the property itself needing to be sold... your share just gets sold to the next investor. As a startup I can see this working, as an investor I could see this working, as a resident in London I'm frankly appalled.
- prostoalex 12y ago
  This has been around, if you buy the house under LLC, you can divvy up the equity whichever way you want it. How's liquidity provided when there's no "next investor"?
stana 12y ago
Thanks to banking deregulation housing has become an investment commodity. In major cities in Australia at the moment half the purchases are for investment rather than owner-occupier. Government incentives like first-home buyer grants (if you can't save for a deposit) have only lifted the prices and helped vendors. Another one is negative-gearing introduced a couple of decades ago allowing tax deduction for investment properties making a loss (after rent), pushing prices higher. Only a few years ago the rules were changed around Australian pension funds (superannuation) allowing leverage. Property purchases from these funds sky-rocketed. All of this while Foreign Investment Review Board (who should be in charge of making sure foreign investors only buy new properties) has not had a single prosecution in last 8 years making you wonder if the rules are being followed at all. It is hard not to make a connection between constantly rising house prices and baby boomer generation dominating the government. It has been recently estimated Australian politicians hold a $300m property portfolio. Talk about conflict of interest..
- yummyfajitas 12y ago
  Why would housing not be an investment commodity if banks were more strongly regulated? What specific regulation do you propose that would prevent housing investments?
  - easytiger 12y ago
    Communal ownership of all property comrade!
    - collyw 12y ago
      Far too radical an idea for here.
  - jussij 12y ago
    In Australia we have negative gearing. In layman's terms it means you can offset property expenses against your real income. So if you have a big income with a corresponding big tax burden, you can reduce you extra income to purchase a property and by using the expenses of that investment, reduce you net income and hence reduce you net tax burden. So rather than paying the tax man, you end up paying the bank, which for you the rich investor, is not bad since the value there is a chance that second, third, forth property that you are now gearing will appreciate in value. So while the tax receipts of the country go down, your paper wealth goes up, that is until the next GFC. So the end result is the rich continue to reduce their tax burden, reducing the tax income of the country, hence passing the tax burden onto the middle and lower classes and in the process the rising house prices encourage those same rich to invest in yet another property as their paper wealth continues to climb. Any one can see that is not good for the country, not good for the community and also not sustainable. It's easy to create a bubble but at some time the buble has to burst.
duckingtest 12y ago
Real estate is so expensive around the world now because of unfair tax policies. True wealth creation is taxed mercilessly via a multitude of income taxes, while gains from real estate are often not taxed at all, even though they're completely unproductive. A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. How is that fair? The net result is an enormous redistribution from productive young people to (mainly) older owners and inefficient land use, a growth-killing policy. The solution is simple. Abolish all personal income taxes (or at least reduce their levels) and replace them with land value taxes (not property), something like 30% of value annually. Unproductive use of land would disappear. Retiring people with homes close to jobs would move out fast somewhere else, as short commute times have no value to them. Uneconomical building limits would disappear (more efficient use of land - multilevel housing - would have much smaller land tax per living surface area) which would reduce transport costs and time wasted. It's easy to imagine many more positive effects. Sadly that's never going to happen. edit: After some thought, never is too strong. If aging gets cured, something like that will be a certainty, because the alternative is the world in which - more numerous - generations after the invention don't own almost anything, which won't work for long.
- doc_holliday 12y ago
  Exactly, capital over the past couple of decades has been unfairly undertaxed vs labour which has been overtaxed to some degrees in places. If we don't alter this course we, I fear will end up at early 1900s distribution of ownership with a crippling economy because actual growth driven by labour will significantly decrease.
- nextw33k 12y ago
  I am fully with you on a capital tax. It would ensure a system of constant high utilisation. Where it gets shouted down is from old people that have lived in their homes for 50 years and seen their property prices rise to make them millionaires on paper but with no real income. They claim its unfair to force someone from their home. Having studied Alzheimer's disease, it's easier on the mind to live in one place for the majority of your life. Being forced to move later in life can be traumatic. Once you start taxing capitol you'll end up with no more overpriced valuations, conservative banking will be back in vogue.
dingaling 12y ago
> A person holding a land in the city for 25 years didn't make anything new Of course they did. When they took out their mortgage, none of that 'money' existed. They had to participate in the creation of wealth in order to pay back mortgage + interest. I've finally paid-off my mortgage. If someone has a more 'productive' use for my land and building, they are welcome to make me a financial offer.

69 points by sasvari 12y ago

Be nice to have got into the market early, many people over here in Australia get the benefit of negative gearing too as they accumulate more houses. I'd particularly be worried as a young person in the States now, a hefty mortgage on top of some of the student loans I've seen look like it'd spell an entire lifetime of loan repayments.

nodata 12y ago

I don't get it: she sold up and made a profit, but unless she downsized, the profit is gone on buying a new place.

joosters 12y ago
The article does say that she downsized, with about £200k difference in price. There's the profit!
henrik_w 12y ago
Yes. Usually when you sell one house, you buy another, so it is a bit of a zero-sum game. However, what does matter is when you entered the market. Entering the housing market today is relatively speaking much more expensive than it was 20 years ago.
makomk 12y ago
If you get lucky and don't particularly care where you live, you don't necessarily have to downsize. London house prices are a lot higher than the rest of the country and have gone up a lot more. You could get a decent-sized house with a garden in most of the UK for what she sold her flat for.
- UK-AL 12y ago
  You could buy a McMansion in most of the UK for that price.
jeffwass 12y ago
Or you upgrade to a bigger house, and roll the profits into a bigger down payment on the next property, keeping a similar sized mortgage. My friend did this, sold his old place and bought a bigger nicer house, keeping his monthly mortgage payment roughly the same, which now is well below market rent.
- onion2k 12y ago
  Except as all equivalent property prices have also gone up, and consequently the price differential between a flat and a house has probably led to a bigger gap in the prices than than the profit than the flat in 1995 and 2015. Eg £32,000 flat in 1995 -> £660,000 flat in 2015 is an increase of 2062%, or £628,000. £100,000 house in 1995 increasing at the same rate of 2062% now costs £2,062,000, up by £1,962,000. To move from the flat to the house you now need to find that additional £1,962,000. Obviously not all properties increase at the same rate, and presumably the author of the article got a quite lucky with her 2062% increase. But even if the house only increased at half the rate of her flat it still costs £1,000,000 now, so she's £300,000 short. Price increases only benefit you if the lower end moves up faster than the higher end (which is very rare) or if you're cashing out.
frobozz 12y ago
It isn't so much about the profit from sale, but about being able to buy in the first place. 10 years after graduation, she bought a two-bed flat in Herne Hill. Such a place wouldn't leave much change from £600K today. For context. Assuming a 3-year course and no gap year, that would make her 31 when she bought. Were she in the same position today, she'd need to have saved up at least £60K for a deposit (90% LTV) and have a salary of £135K (4x is a common salary multiplier). Given that that's more than a top decile _couple_ in London currently earns, that's not likely. The average salary today for her job at the time, is less than £24K, less than a fifth of what she would need. Given the high cost of private rent, and the fact that social housing is only available for existing tenants and people who _really_ need it, saving up that much in only 9 years is difficult. Meanwhile, house prices continue to rise faster than incomes, the longer you wait, hoping for a crash, the less likely it looks that you'll be able to afford a place even after the crash happens. Even as a direct response to your point, moving out of London makes your money go much further. With that money, you could get a pretty nice house even as close to London as Reading, Maidenhead or even the outer London Boroughs. Not to mention what you could do with the money if you moved away from the south east entirely. At an estimated 61 years old, she's in a position to think about retiring soon, and considering she's not from London, she might well be considering moving away when she no longer needs to be here for work. http://www.zoopla.co.uk/for-sale/property/london/dulwich-road/ http://www.zoopla.co.uk/for-sale/property/london/dulwich-roa... http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-salary-compare http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-... http://www.payscale.com/research/UK/Job=Communications_Officer/Salary http://www.payscale.com/research/UK/Job=Communications_Offic...

awjr 12y ago

In the UK it's normal practice to get in a chain. You sell yours, line up the one you want to buy, and all 14 people in the chain complete on the same day. Not sure you should be selling your house, then deciding to look. You have to ask yourself what changed in the UK mortgage market to create this increase in housing value. It comes down to a bank regulation change the government put in place in 1996. Banks were able to offer buy-to-let mortgages. This has fundamentally distorted the housing market in the UK. In London you also have another issue. Apparently 40% of new build apartments are bought and never lived in. They are used as an investment to hold money 'safely' primarily by foreign buyers. [EDIT] Citation for "buy to leave" http://www.theguardian.com/business/2014/dec/04/property-investors-islington-london-homes-empty-jail http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islington-council-buy-to-leave-investors-uk-housing http://www.theguardian.com/commentisfree/2014/dec/08/islingt... So you have a situation where the Banks leant like crazy inflating the housing market, the crash happened, the banks hardened their mortgage lending criteria, which forced most people into renting, enabling landlords to maximise returns and invest further in rental properties using buy to let mortgages that use rental income as part of the payment calculation. It's one hell of a vicious circle. From my point of view I have benefited, but I honestly cannot see my 11 year old daughter ever owning her own property.

CmonDev 12y ago
I thought a major reason was Thatcher letting people who should not be owning a house buy one at a cut price?
- matthewmacleod 12y ago
  No - 'right to buy' is not related to the UK's housing crisis, aside from the fact it depleted social housing stock (which is a separate issue that should not have been allowed to happen). Offering cut-price sales of social property to council tenants is an amazingly powerful tool for giving people ownership over their communities.
  - pjc50 12y ago

vacri 12y ago

A couple of things are worth mentioning. Firstly, everything but housing is much cheaper now than in the 80s/90s. People will spend their money somewhere. The ability to do your own repairs is also much greater, as the huge (and cheap!) hardware stores have sprung up and the DIY culture has become stronger. Secondly, I don't know about the UK, but here in Australia, home loans in the 80s had interest rates of almost 20%, as opposed to 5-6% today. It had calmed a little in the 90s though. The cost in dollar terms was much cheaper, sure, but it was still difficult to service at the time. Buying a house was still monumentally stressful. I know a few boomers who were unable to maintain their mortgages in that time. Just because the sticker price was significantly smaller doesn't mean that it was all that much easier. Edit: it's also worth mentioning that the median wage in the UK has increased about 50% from 1990 to 2010 (~16k to ~24k) and the average wage more than that. Housing is still depressingly expensive, but the numbers aren't quite so wildly different as shown.

nl 12y ago
here in Australia, home loans in the 80s had interest rates of almost 20%, as opposed to 5-6% today. That's a pretty big exaggeration. Rates peaked at 17% in 1989, but were below 15% for most of the 80's[1]. [1] http://www.loansense.com.au/historical-rates.html http://www.loansense.com.au/historical-rates.html
- tonylemesmer 12y ago
  Individual loan products from lenders would have been slightly different to rate shown in the graph. So "almost 20%" isn't that far off.
  - nl 12y ago
    I'm old enough to remember rates in the 80's (though not old enough to have had one!). And I have a loan now, and the rates almost exactly match the rates in that table. Here's another reference: http://www.abc.net.au/news/2007-08-08/the-reality-of-interest-rates/2525330 http://www.abc.net.au/news/2007-08-08/the-reality-of-interes... 17% was as high as they got for mortgages.

junto 12y ago

What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have crashed big time (2001, 2008), the BoE has propped it up by making sure that borrowing remained dirt cheap and the government made sure that the market stayed liquid (raising stamp duty levels for example). Every time they do this, they just exacerbate the problem long term, which is quite simply, that the market needs a correction, and the longer they put it off, the more painful the correction is going to be (like it was early 1990's in the UK but worse). I for one say let it burn.

brianmcc 12y ago
In many places in the UK, it did crash big time. Plenty of people I know even today are in homes well below their 2007 levels or have sold for painful losses. London is unusual in that many properties sell for cash, to investors, and in fact the BoE and mortgage lenders have surprisingly little influence in terms of rate changes. Not sure letting anything "burn" particularly helps anybody. Edit: I suspect "let it burn" reflects a certain frustration, you have my sympathy if you or your family/friends are finding the situation a barrier. Facts and figures can mask the very personal cost of being unable to achieve fundamental goals in life such putting down roots for one's family.
- awjr 12y ago
  My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)
  - jgraham 12y ago
    The data doesn't seem to support that view [1]. The headline claim there is that average property prices across the country rose by 7% last year, with London more than double that and no area showing an annual fall. It seems like your example of Bristol is only becoming cheaper relative to London, not cheaper in any absolute sense. [1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/398604/December_HPI-2014.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...

buro9 12y ago

I saw a startup tweeting yesterday about a shared investment. The gist is that instead of investing in stocks and shares, you put your money into property and a shared structure gives you some % of the property in question. The startup actually owns the property, and there is some legal allocation of your portion, and they offer the means to exit your share of a property without the property itself needing to be sold... your share just gets sold to the next investor. As a startup I can see this working, as an investor I could see this working, as a resident in London I'm frankly appalled.

prostoalex 12y ago
This has been around, if you buy the house under LLC, you can divvy up the equity whichever way you want it. How's liquidity provided when there's no "next investor"?

stana 12y ago

Thanks to banking deregulation housing has become an investment commodity. In major cities in Australia at the moment half the purchases are for investment rather than owner-occupier. Government incentives like first-home buyer grants (if you can't save for a deposit) have only lifted the prices and helped vendors. Another one is negative-gearing introduced a couple of decades ago allowing tax deduction for investment properties making a loss (after rent), pushing prices higher. Only a few years ago the rules were changed around Australian pension funds (superannuation) allowing leverage. Property purchases from these funds sky-rocketed. All of this while Foreign Investment Review Board (who should be in charge of making sure foreign investors only buy new properties) has not had a single prosecution in last 8 years making you wonder if the rules are being followed at all. It is hard not to make a connection between constantly rising house prices and baby boomer generation dominating the government. It has been recently estimated Australian politicians hold a $300m property portfolio. Talk about conflict of interest..

yummyfajitas 12y ago
Why would housing not be an investment commodity if banks were more strongly regulated? What specific regulation do you propose that would prevent housing investments?
- easytiger 12y ago
  Communal ownership of all property comrade!
  - collyw 12y ago
    Far too radical an idea for here.
- jussij 12y ago
  In Australia we have negative gearing. In layman's terms it means you can offset property expenses against your real income. So if you have a big income with a corresponding big tax burden, you can reduce you extra income to purchase a property and by using the expenses of that investment, reduce you net income and hence reduce you net tax burden. So rather than paying the tax man, you end up paying the bank, which for you the rich investor, is not bad since the value there is a chance that second, third, forth property that you are now gearing will appreciate in value. So while the tax receipts of the country go down, your paper wealth goes up, that is until the next GFC. So the end result is the rich continue to reduce their tax burden, reducing the tax income of the country, hence passing the tax burden onto the middle and lower classes and in the process the rising house prices encourage those same rich to invest in yet another property as their paper wealth continues to climb. Any one can see that is not good for the country, not good for the community and also not sustainable. It's easy to create a bubble but at some time the buble has to burst.

duckingtest 12y ago

Real estate is so expensive around the world now because of unfair tax policies. True wealth creation is taxed mercilessly via a multitude of income taxes, while gains from real estate are often not taxed at all, even though they're completely unproductive. A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. How is that fair? The net result is an enormous redistribution from productive young people to (mainly) older owners and inefficient land use, a growth-killing policy. The solution is simple. Abolish all personal income taxes (or at least reduce their levels) and replace them with land value taxes (not property), something like 30% of value annually. Unproductive use of land would disappear. Retiring people with homes close to jobs would move out fast somewhere else, as short commute times have no value to them. Uneconomical building limits would disappear (more efficient use of land - multilevel housing - would have much smaller land tax per living surface area) which would reduce transport costs and time wasted. It's easy to imagine many more positive effects. Sadly that's never going to happen. edit: After some thought, never is too strong. If aging gets cured, something like that will be a certainty, because the alternative is the world in which - more numerous - generations after the invention don't own almost anything, which won't work for long.

doc_holliday 12y ago
Exactly, capital over the past couple of decades has been unfairly undertaxed vs labour which has been overtaxed to some degrees in places. If we don't alter this course we, I fear will end up at early 1900s distribution of ownership with a crippling economy because actual growth driven by labour will significantly decrease.
nextw33k 12y ago
I am fully with you on a capital tax. It would ensure a system of constant high utilisation. Where it gets shouted down is from old people that have lived in their homes for 50 years and seen their property prices rise to make them millionaires on paper but with no real income. They claim its unfair to force someone from their home. Having studied Alzheimer's disease, it's easier on the mind to live in one place for the majority of your life. Being forced to move later in life can be traumatic. Once you start taxing capitol you'll end up with no more overpriced valuations, conservative banking will be back in vogue.

dingaling 12y ago

> A person holding a land in the city for 25 years didn't make anything new Of course they did. When they took out their mortgage, none of that 'money' existed. They had to participate in the creation of wealth in order to pay back mortgage + interest. I've finally paid-off my mortgage. If someone has a more 'productive' use for my land and building, they are welcome to make me a financial offer.