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Property is a zero sum game. People without houses lose the equivalent in future spending as homeowners gain. So propping up a market is directly taking money f

Property is a zero sum game. People without houses lose the equivalent in future spending as homeowners gain. So propping up a market is directly taking money from the young and increasingly old non homeowners. So not doing anything is putting a large number of people in a bad situation.

pjc50 12y ago
Zero sum, unless more houses are built...
notahacker 12y ago
Property isn't quite a zero sum game; as the last few years have show the overall losses from a crash outweigh the benefits of lower prices and greater liquidity to people without houses (especially if the result is that people without houses can't get mortgages even after the prices have fallen) That's not to say there shouldn't be more pressure put on property price appreciation, not to mention confiscatory levels of capital gains tax on property speculators that aren't tax-resident in the UK. But inducing a property price crash (as opposed to slowing property price inflation) would be a bad move for the economy as a whole, as well as electoral suicide in a country where the majority of the population have a mortgage or own their house outright.
- lentil_soup 12y ago
  Doesn't "losses from a crash outweigh the benefits of lower prices" depend on who you're talking about?. For me this has to be looked at from the point of who it affects the most. A person that already has a house is much better suited to "take the hit" of property prices than someone that doesn't have one (in general terms). Obviously you have to manage it, but in the end you should strive to protect those that are more vulnerable.
  - notahacker 12y ago
    People most vulnerable to house price changes are people who own the title deeds to a house and an obligation to make mortgage repayments which may end up vastly exceeding the future value of the house. And the banks which see rising default rates from owners in negative equity, repossessed houses they can't sell. And anyone whose pension fund bought the wrong tranche of CDOs. Not to mention property developers, and workers in construction industries that support it, assuming the house price fall is generalised. People least likely to be positively affected by a house price crash include people that don't have houses, the majority of whom face considerably more difficulty and up-front expense in obtaining a mortgage in an environment of falling or unstable property prices. Sure, there are some beneficiaries from a house price crash, just like some people make money shorting a failing company. That doesn't mean there isn't a deadweight loss, and if your conception of people who are "most vulnerable" to property prices prioritizes the welfare of those with no significant exposure to property but plenty of liquid funds and a long term investment horizon, it's a very strange conception. Much of the world is still suffering from the after-effects of a major house price crash in the US several years later; I'm genuinely quite saddened that some people are so adamant the effects of that must have been "zero sum" they feel obliged to reach for the downvote button when HN commenters have the temerity to suggest otherwise.
ptaipale 12y ago
> Property is a zero sum game No it is not. Properties - houses - can be built. When prices go up, the incentive to build more increases. It could be argued that land ownership is a zero sum game, because you cannot manufacture land. But even that is not quite true, as can be seen in areas where more land is claimed from sea [0], effectively manufactured. Elsewhere, new land may emerge due to land rising after the recent Ice Age [1]. More importantly, land use - zoning - is something that can be changed, and it’s where economic incentives have an impact. For instance, in UK there's a lot of discussion about building on the green belt around London. And there are other factors here than just money, of course. It could be that money cannot buy a plot to build, but a racial or cultural identity can justify constructing what eventually become new properties. This does not always happen without conflict [2]. [0] https://news.ycombinator.com/item?id=8940235 https://news.ycombinator.com/item?id=8940235 [1] http://en.wikipedia.org/wiki/Post-glacial_rebound http://en.wikipedia.org/wiki/Post-glacial_rebound [2] http://en.wikipedia.org/wiki/Dale_Farm http://en.wikipedia.org/wiki/Dale_Farm

pjc50 12y ago

Zero sum, unless more houses are built...

notahacker 12y ago

Property isn't quite a zero sum game; as the last few years have show the overall losses from a crash outweigh the benefits of lower prices and greater liquidity to people without houses (especially if the result is that people without houses can't get mortgages even after the prices have fallen) That's not to say there shouldn't be more pressure put on property price appreciation, not to mention confiscatory levels of capital gains tax on property speculators that aren't tax-resident in the UK. But inducing a property price crash (as opposed to slowing property price inflation) would be a bad move for the economy as a whole, as well as electoral suicide in a country where the majority of the population have a mortgage or own their house outright.

lentil_soup 12y ago
Doesn't "losses from a crash outweigh the benefits of lower prices" depend on who you're talking about?. For me this has to be looked at from the point of who it affects the most. A person that already has a house is much better suited to "take the hit" of property prices than someone that doesn't have one (in general terms). Obviously you have to manage it, but in the end you should strive to protect those that are more vulnerable.
- notahacker 12y ago
  People most vulnerable to house price changes are people who own the title deeds to a house and an obligation to make mortgage repayments which may end up vastly exceeding the future value of the house. And the banks which see rising default rates from owners in negative equity, repossessed houses they can't sell. And anyone whose pension fund bought the wrong tranche of CDOs. Not to mention property developers, and workers in construction industries that support it, assuming the house price fall is generalised. People least likely to be positively affected by a house price crash include people that don't have houses, the majority of whom face considerably more difficulty and up-front expense in obtaining a mortgage in an environment of falling or unstable property prices. Sure, there are some beneficiaries from a house price crash, just like some people make money shorting a failing company. That doesn't mean there isn't a deadweight loss, and if your conception of people who are "most vulnerable" to property prices prioritizes the welfare of those with no significant exposure to property but plenty of liquid funds and a long term investment horizon, it's a very strange conception. Much of the world is still suffering from the after-effects of a major house price crash in the US several years later; I'm genuinely quite saddened that some people are so adamant the effects of that must have been "zero sum" they feel obliged to reach for the downvote button when HN commenters have the temerity to suggest otherwise.

ptaipale 12y ago

> Property is a zero sum game No it is not. Properties - houses - can be built. When prices go up, the incentive to build more increases. It could be argued that land ownership is a zero sum game, because you cannot manufacture land. But even that is not quite true, as can be seen in areas where more land is claimed from sea [0], effectively manufactured. Elsewhere, new land may emerge due to land rising after the recent Ice Age [1]. More importantly, land use - zoning - is something that can be changed, and it’s where economic incentives have an impact. For instance, in UK there's a lot of discussion about building on the green belt around London. And there are other factors here than just money, of course. It could be that money cannot buy a plot to build, but a racial or cultural identity can justify constructing what eventually become new properties. This does not always happen without conflict [2]. [0] https://news.ycombinator.com/item?id=8940235 https://news.ycombinator.com/item?id=8940235 [1] http://en.wikipedia.org/wiki/Post-glacial_rebound http://en.wikipedia.org/wiki/Post-glacial_rebound [2] http://en.wikipedia.org/wiki/Dale_Farm http://en.wikipedia.org/wiki/Dale_Farm