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>> Can you share why you haven't switched over to owning from renting? Yes, because you need a minimum X% upfront payment and all kinds of eligibility to purch

>> Can you share why you haven't switched over to owning from renting? Yes, because you need a minimum X% upfront payment and all kinds of eligibility to purchase a house. For renters and people who can't afford that upfront cost (you can't take a loan to take another loan), they are left in a perpetual rental cycle. The others who are able to break out of that cycle once, go on to build more and more houses. So one group of people dream of living in their own house, whereas others build many and rent it out for half the rent. If you've seen the latest infographic about how being born rich gives you a golden spoon, and becoming rich is not about "working hard", you'll understand how these rental policies screw up people here. And people also factor in the "rise of rental prices", so as long as you have money, you can buy a home loan now and bank on rental prices increasing soon. In around 4-5 years the rents would have increased enough to cover the mortgage, and then its time to start shopping for a new building. Property becomes gold here partly because of the increasing rent prices. Even if you lose some money in mortage in the short term, anyways you also own the property which is increasing in value. So even people leaving a city will still retain their home and let it out for rent, rather than selling it back into the system. Buy buy buy, never sell unless you're in a financial emergency. Home Loans are also different here. We have fixed rates (9.75-11%) and longer tenures. >> Modern urban poor and homeless are a function of wage disparity. No, its a function of wage rise. Doesn't matter how much you get paid, but as long as your salary rises the same as rental price rise, you can retain your home. If not, you lose your home, as simple as that. You can't leave the city because there are not much jobs anywhere else. So you have to stay, but if you can't retain your home it will take you on a trip closer and closer to the slums until you realize one day that you're in it. Food is mostly government subsidized, so people can even manage the food. But housing is making a killing here. So when it comes to inflation, housing plays the biggest part and not food or transport. I can't give you fancy numbers though.

ChuckMcM 11y ago
I see, so how long has this -- you can buy a home loan now and bank on rental prices increasing soon. In around 4-5 years the rents would have increased enough to cover the mortgage, and then its time to start shopping for a new building. -- been going on? 5 years? 10 years? 75 years? There was an interesting article in Bloomberg about Mumbai in 2012 (http://www.bloomberg.com/bw/articles/2012-07-05/mumbais-boom-turns-renters-into-millionaires http://www.bloomberg.com/bw/articles/2012-07-05/mumbais-boom...) with the rent control there causing huge market imbalances as India lifts millions of people out of poverty into the middle classes. It reads similarly to situations in Shanghai and Chengdu as a people's wages have risen faster than the housing market could keep up. The reason I ask about how long it has gone on is that the situation you describe always ends up correcting at some point, (here in the US we called it the housing bubble), and when it does all the people who were betting on the ever increasing rents find themselves going bankrupt because rents cannot increase any further, and that puts them into a financial emergency where they sell, which depresses prices of houses, which results in other speculators also falling out of the market, and you get a really huge recession with lots of people going broke and a bunch of supporting industries (construction, remodelling, furniture, etc) being carried along as well.
- rdsubhas 11y ago
  Sorry for the late response, not sure if this thread is active anymore. By correction, I guess you mean a slowdown or stall of the rent rate rise. I'm just saying that enough damage is already done here, and what we'll see is just two extremes (obsession or recession). Given that so many people's livelihood depends on having a roof above their head, there has to be a better option. I don't know exactly how Germany is planning to implement these laws. But at least I feel a sustained rate of growth should make life better for everybody in the city, rather than plain rent caps or slabs.
  - ChuckMcM 11y ago
    Thanks again for responding. By 'correction' I mean rents reverting to market rates rather than speculative rates. When that happens a lot of people will go bankrupt and often in those situations there is a time where things are cheaper than they 'should' be (by market forces). Foreclosed homes in the US was a good example of this, since the bank will sell at any price, it allows the price to go much lower than if people are selling. When your loan holders get desperate because the loan is due and no one is willing to pay their extortionate rent, they will either go broke (lender reclaims the property and sells it at a loss) or reduce rents dramatically to insure 100% occupancy (lowering prices to capture more of the demand). Sometimes both, rents will go down and the people owning the buildings will go bankrupt. If you're willing too, let me know what city this is happening in, I'd like to put it into my crawler to flag articles about rents to watch how this plays out over time.

ChuckMcM 11y ago

I see, so how long has this -- you can buy a home loan now and bank on rental prices increasing soon. In around 4-5 years the rents would have increased enough to cover the mortgage, and then its time to start shopping for a new building. -- been going on? 5 years? 10 years? 75 years? There was an interesting article in Bloomberg about Mumbai in 2012 (http://www.bloomberg.com/bw/articles/2012-07-05/mumbais-boom-turns-renters-into-millionaires http://www.bloomberg.com/bw/articles/2012-07-05/mumbais-boom...) with the rent control there causing huge market imbalances as India lifts millions of people out of poverty into the middle classes. It reads similarly to situations in Shanghai and Chengdu as a people's wages have risen faster than the housing market could keep up. The reason I ask about how long it has gone on is that the situation you describe always ends up correcting at some point, (here in the US we called it the housing bubble), and when it does all the people who were betting on the ever increasing rents find themselves going bankrupt because rents cannot increase any further, and that puts them into a financial emergency where they sell, which depresses prices of houses, which results in other speculators also falling out of the market, and you get a really huge recession with lots of people going broke and a bunch of supporting industries (construction, remodelling, furniture, etc) being carried along as well.

rdsubhas 11y ago
Sorry for the late response, not sure if this thread is active anymore. By correction, I guess you mean a slowdown or stall of the rent rate rise. I'm just saying that enough damage is already done here, and what we'll see is just two extremes (obsession or recession). Given that so many people's livelihood depends on having a roof above their head, there has to be a better option. I don't know exactly how Germany is planning to implement these laws. But at least I feel a sustained rate of growth should make life better for everybody in the city, rather than plain rent caps or slabs.
- ChuckMcM 11y ago
  Thanks again for responding. By 'correction' I mean rents reverting to market rates rather than speculative rates. When that happens a lot of people will go bankrupt and often in those situations there is a time where things are cheaper than they 'should' be (by market forces). Foreclosed homes in the US was a good example of this, since the bank will sell at any price, it allows the price to go much lower than if people are selling. When your loan holders get desperate because the loan is due and no one is willing to pay their extortionate rent, they will either go broke (lender reclaims the property and sells it at a loss) or reduce rents dramatically to insure 100% occupancy (lowering prices to capture more of the demand). Sometimes both, rents will go down and the people owning the buildings will go bankrupt. If you're willing too, let me know what city this is happening in, I'd like to put it into my crawler to flag articles about rents to watch how this plays out over time.