Dutch cities want to ban property investors in all neighborhoods(nltimes.nl)
nltimes.nl
Dutch cities want to ban property investors in all neighborhoods
https://nltimes.nl/2021/09/02/dutch-cities-want-ban-property-investors-neighborhoods
596 comments
Another Cornishman here (Par). The financial destitution and how much harder they have to work for the same things I do in the South East is unsustainable. Cornwall has Luther to the right politically and that’s because there’s been some useful scapegoats. Now those scapegoats have been slain and things are getting worse not better I hope we’ll see policies that are focused on root cause issues instead of ideology (left or right). Property is an obvious example. Dormant second home now means the Cornish rent or live in low quality new build accommodation (hello Wainhomes) but when communities are hollowed out and empty through winter local businesses fail and the destitution affects even the pretty locations. Those people wonder what happened to the quaint fishing village their second home is in. Why is cafe closed, the nearest shop a supermarket that is a 30 min drive away. Why is their a drug problem? Why are the pins all boarded up etc etc. I hope Cornwall and it’s political representatives can act before the bust comes and find a balance between tourism and building sustainable local businesses in different sectors. The obvious place to start is accommodation. If people cannot put a roof over their head how can a community function least of all an economy.
Unfortunately, the British press and all the wealthy people with second homes still have Brexit as a scapegoat for why cafes and shops in tourist destinations can't find staff. Never mind the fact that AirBNB and second homes have pushed up house prices and rents to the point that it's impossible to live there on the kind of pay those jobs have, according to the media it's all the fault of Brexit driving away the foreign workers who had to do the jobs because all the Brexit-voting morons who were brainwashed into blaming the EU are too lazy to do them.
There's a dead comment later in this thread which using directed abusive language towards another commenter while linking to a Louis Rossmann video.
The video [1] was interesting, although the dead comment seemed to completely ignore the video's [1] main point, where Louis talks about a hypothesis [2] where in New York City there may be an incentive structure between real estate investors and banks which is creating a market failure. The hypothesis [2] is that a building's assessed value is based on the rental prices that the landlord asks for even if nobody will reasonably pay those rents. The hypothesis speculates that, if a building's assessed value is lowered, it could trigger conditions in loan contracts that penalize the landlord or investor. Because of this, there may be an incentive for the landlord to keep buildings vacant instead of lowering their prices to market rate.
[1] https://www.youtube.com/watch?v=xfHQZj3_TX4&t=580s
[2] https://www.reddit.com/r/nyc/comments/innhah/nearly_twothird...
The video [1] was interesting, although the dead comment seemed to completely ignore the video's [1] main point, where Louis talks about a hypothesis [2] where in New York City there may be an incentive structure between real estate investors and banks which is creating a market failure. The hypothesis [2] is that a building's assessed value is based on the rental prices that the landlord asks for even if nobody will reasonably pay those rents. The hypothesis speculates that, if a building's assessed value is lowered, it could trigger conditions in loan contracts that penalize the landlord or investor. Because of this, there may be an incentive for the landlord to keep buildings vacant instead of lowering their prices to market rate.
[1] https://www.youtube.com/watch?v=xfHQZj3_TX4&t=580s
[2] https://www.reddit.com/r/nyc/comments/innhah/nearly_twothird...
I am not a housing investor, but I see many misguided articles claiming housing investors are driving prices up.
The factors that primarily control pricing in the housing market are supply and demand.
In Seattle, London, Los Angeles and elsewhere demand has risen steadily but supply has not. This causes prices to increase sharply.
The solution is to increase the housing supply. If the government removes regulations preventing developers from building new houses and apartments, many more will be built and prices will drop.
Many young people prefer to live in inexpensive high density housing. I remember looking at renting an apartment without a kitchen (there was a big shared kitchen for the whole floor) and without its own bathroom in my early twenties. Monthly rental price on this is around $300 per month as compared to $1,600 for a single bedroom apartment. Why aren’t there more of these? Government regulation prevents them from being built.
Government permitting processes take years to go through and cost millions of dollars for big new apartment buildings or for residential developments. If we lighten / remove these regulations, housing supply will decrease dramatically.
If you don’t want housing investors bidding up housing prices, then allow the supply to continuously increase. This will continuously drive down prices and no investors will want to buy.
The factors that primarily control pricing in the housing market are supply and demand.
In Seattle, London, Los Angeles and elsewhere demand has risen steadily but supply has not. This causes prices to increase sharply.
The solution is to increase the housing supply. If the government removes regulations preventing developers from building new houses and apartments, many more will be built and prices will drop.
Many young people prefer to live in inexpensive high density housing. I remember looking at renting an apartment without a kitchen (there was a big shared kitchen for the whole floor) and without its own bathroom in my early twenties. Monthly rental price on this is around $300 per month as compared to $1,600 for a single bedroom apartment. Why aren’t there more of these? Government regulation prevents them from being built.
Government permitting processes take years to go through and cost millions of dollars for big new apartment buildings or for residential developments. If we lighten / remove these regulations, housing supply will decrease dramatically.
If you don’t want housing investors bidding up housing prices, then allow the supply to continuously increase. This will continuously drive down prices and no investors will want to buy.
Exactly!
Here in Australia we are seeing remarkable growth in property prices over the last quarter!
Sydney prices grew at $AU1200 per day!
In the residential housing market there just isn’t enough supply!
I can say anecdotally that’s younger buyers are being accompanied by their parents, who are assisting with finance.
Its well observed that people are queuing down the street to inspect properties, and literally writing offers out on the kitchen table!
Properties are selling on minutes, with prices being pushed up by desperate buyers with access to finance from loans with low interest rates with deposits from their parents!
When you take a 20 or 30 year mortgage, what’s $20 or $30k here and there!
That’s what’s driving prices up!
Supply and demand!
Here in Australia we are seeing remarkable growth in property prices over the last quarter!
Sydney prices grew at $AU1200 per day!
In the residential housing market there just isn’t enough supply!
I can say anecdotally that’s younger buyers are being accompanied by their parents, who are assisting with finance.
Its well observed that people are queuing down the street to inspect properties, and literally writing offers out on the kitchen table!
Properties are selling on minutes, with prices being pushed up by desperate buyers with access to finance from loans with low interest rates with deposits from their parents!
When you take a 20 or 30 year mortgage, what’s $20 or $30k here and there!
That’s what’s driving prices up!
Supply and demand!
It's trying to run away from inflation. USA and others have been printing outrageous amount of money, huge inflation is coming, sometimes it's already there. Solution is not to build more homes ad infinitum, but to curb the printing and get back to responsible fiscal policy without bailouts.
Two of the homes on my block here in an inner Seattle suburb are owned by Chinese investors and have never been lived in or rented.
The owner of one property owns 8 other newly built homes within the city. The 2nd property is owned by a person that has 14 other properties listing them as the registered owner.
I miss the people that lived in the homes that were razed to make way for these million dollar blights on the neighborhood.
These vampire homes just accrue damage (whether the glass garage door panes start shattering, or the siding starts going, or the owner decides the landscaping should be ripped out and redone again for god knows what reason?) followed by the sons or cousins of the property owners dealing with it a few weeks later.
No value is gained by these vagrant properties existing. Less people live in my neighborhood due to it, housing is harder to find, the city and county have less reason to invest in making local transit infrastructure better.
We need to tax vagrant properties. USPS has the data on which units are not collecting their mail on a daily basis, SPU/City Light knows who is not putting their trash out or using any power or water, and voter registration records are public. We could easily start assessing a 3 cent per square foot daily vagrancy tax until residency is established at the formerly vagrant address.
The owner of one property owns 8 other newly built homes within the city. The 2nd property is owned by a person that has 14 other properties listing them as the registered owner.
I miss the people that lived in the homes that were razed to make way for these million dollar blights on the neighborhood.
These vampire homes just accrue damage (whether the glass garage door panes start shattering, or the siding starts going, or the owner decides the landscaping should be ripped out and redone again for god knows what reason?) followed by the sons or cousins of the property owners dealing with it a few weeks later.
No value is gained by these vagrant properties existing. Less people live in my neighborhood due to it, housing is harder to find, the city and county have less reason to invest in making local transit infrastructure better.
We need to tax vagrant properties. USPS has the data on which units are not collecting their mail on a daily basis, SPU/City Light knows who is not putting their trash out or using any power or water, and voter registration records are public. We could easily start assessing a 3 cent per square foot daily vagrancy tax until residency is established at the formerly vagrant address.
While this is true for supply, the same can be said about demand. Foreign investors drive prices up by seeing some other county's housing as an investment. If taxes were increased for these investors, or some other disincentive was in place, demand would fall driving prices down
> The hypothesis speculates that, if a building's assessed value is lowered, it could trigger conditions in loan contracts that penalize the landlord or investor.
This is the issue exactly. A commercial mortgage lender will insist on a certain maximum Loan-to-Value ratio. The value of the property is directly related to the long-term income that it generates (i.e., the net present value of all future cash flows). If the amounts of cash flows go down, then the value of the property goes down and the loan-to-value ratio goes up. In a commercial loan, the lender can often call the loan due at certain times during the term of the loan for any reason. One big reason to do so is if the loan-to-value ratio goes up beyond the level that the lender was comfortable with. Refinancing in such a circumstance could be very expensive. Thus, it may make more sense for an owner to keep a property vacant and lose money temporarily than to take on a tenant at a lower rent and possibly cause the lender to call the loan.
This is the issue exactly. A commercial mortgage lender will insist on a certain maximum Loan-to-Value ratio. The value of the property is directly related to the long-term income that it generates (i.e., the net present value of all future cash flows). If the amounts of cash flows go down, then the value of the property goes down and the loan-to-value ratio goes up. In a commercial loan, the lender can often call the loan due at certain times during the term of the loan for any reason. One big reason to do so is if the loan-to-value ratio goes up beyond the level that the lender was comfortable with. Refinancing in such a circumstance could be very expensive. Thus, it may make more sense for an owner to keep a property vacant and lose money temporarily than to take on a tenant at a lower rent and possibly cause the lender to call the loan.
I have heard this explanation a few times, but what i don't get is why doesn't a long term vacancy trigger an adjusted loan to value ratio? Seems like it would cause an appraisal to be much lower than just charging less rent and actually getting a tenant.
The present value of an income stream starting in the future at the established rate may be higher in some cases than the present value of an income stream at a lower rate that starts immediately.
Well, when you apply for loans the bank will want to know (and will send an appraiser) to estimate sales and rental values. If the developer's expectations on rental or sales income on a multifamily property are higher than the reality, and they lower sales prices (condos) or rental amounts, there's potential for them to get called to provide more capital. Because they may reappraise. What I've just explained probably has its own vocabulary I'm not using in the commercial real estate world, but my experience here is that my building has this problem and the brokers explained why they preferred to leave things vacant.
As it turns out, after 18 months, as the city comes back after the pandemic, the vacancies are now suddenly much lower. The building for 1/3 full for years.
As it turns out, after 18 months, as the city comes back after the pandemic, the vacancies are now suddenly much lower. The building for 1/3 full for years.
>it's all the fault of Brexit driving away the foreign workers who had to do the jobs
Forgive me since I’m American, but wasn’t getting rid of foreigners taking jobs one of the selling points of Brexit?
Forgive me since I’m American, but wasn’t getting rid of foreigners taking jobs one of the selling points of Brexit?
The primary driving force was nativism. Even right up to the end the UK wanted to remain in the common market, but part of being in the common market is freedom to migrate.
It also exposed the loss of influence the UK had in the EU. Many provisions were carved out for them in the 80s. But when it came to the EC the EU was not making any exceptions for them this time.
It also exposed the loss of influence the UK had in the EU. Many provisions were carved out for them in the 80s. But when it came to the EC the EU was not making any exceptions for them this time.
Yup. Immigration was the issue. Bunch of other stuff around the edges like English exceptionalism.
Note that laurent92 talks about "Englishmen" not "British voices". That's incredibly telling.
Note that laurent92 talks about "Englishmen" not "British voices". That's incredibly telling.
It was, but now that they're gone it's only become more obvious that locals simply don't want those jobs.
Of course nobody wants these jobs. A lot of positions were filled by tourists and travelers who stayed there for a little while and worked a bit to earn side money.
- Staff at a restaurant is £8 an hour, that is minimum wage.
- Expect two shifts far apart, around 11am-2pm and 7pm-11pm.
- Work on Saturday and Sunday and some of the week. You will never know more than a few days ahead when you are expected to work.
- Staff at a restaurant is £8 an hour, that is minimum wage.
- Expect two shifts far apart, around 11am-2pm and 7pm-11pm.
- Work on Saturday and Sunday and some of the week. You will never know more than a few days ahead when you are expected to work.
- Have your shifts cut in retaliation because you couldn't/wouldn't come in to cover on your day off.
It was, especially getting rid of the kind of immigration that turned blue-collar working-class jobs into something that no-one local could possibly live on. Perhaps more importantly, all the educated influential opponents of Brexit insisted that this wasn't happening, that the idea EU immigration was driving down wages was a cynical lie. I'm pretty sure that it is not lost on most of the supporters of Brexit that the media is trying to spin the fact companies are having to put up wages now we've left as further proof Brexit was based on lies.
> that the idea EU immigration was driving down wages was a cynical lie
It was a lie, EU citizens in the UK earn significantly more than the locals. If I wanted to be a member of the underclass, say a cleaner, I’d be in Germany, where I wouldn't have to pay 6K£ for pregnancy and 12K£pa to send a child to a half-decent primary school.
It was a lie, EU citizens in the UK earn significantly more than the locals. If I wanted to be a member of the underclass, say a cleaner, I’d be in Germany, where I wouldn't have to pay 6K£ for pregnancy and 12K£pa to send a child to a half-decent primary school.
The thing is, from what I can tell the migrant workers doing these kinds of poorly-paid jobs didn't have to worry about the cost of pregnancy or sending kids to a half-decent primary school because their families weren't actually living here - they came over, worked, and sent money back home to their families in their home countries with lower cost of living. It's that which made it possible for them to work for less. You're right that if they and their families had to live in the UK permanently they'd need to be paid a lot more.
I am not saying that the set of poor Europeans living in the UK is empty, nor I’m saying that no grocer in the UK ever hired a Spaniard or a Frenchman for 11.1£ per hour while a local would have cost 11.6£ per hour, or whatever the poor earn in the UK, but that’s not a social phenomenon, it’s a guy, it’s at best an anecdote. Similarly EU citizens living under bridges to send remittances home, is not a social phenomenon in the UK, it’s a Brexit myth. You can check the data yourself. Again, you may know a guy that…, but that’s an anecdote. The mythological poor EU citizen that goes abroad to send money home and live in a rathole with 17 other poor souls, assuming it exist, is way better off going to Germany than to the UK. On a side note, remittances from Germany are 2.5 times those from the UK, from France 1.5.
EU citizens living in the UK on average earn a lot more than the locals and are better qualified. So saying that migration from the EU was driving down wages was indeed a lie.
But even if we assume that the UK had been swarmed by millions of illiterate cretins, there isn’t any evidence anywhere in the world that immigration suppresses wages permanently (there may be some temporary short term effects, but before, you say anything, the UK has been in the EU for decades, so we are indeed in the long run).
EU citizens living in the UK on average earn a lot more than the locals and are better qualified. So saying that migration from the EU was driving down wages was indeed a lie.
But even if we assume that the UK had been swarmed by millions of illiterate cretins, there isn’t any evidence anywhere in the world that immigration suppresses wages permanently (there may be some temporary short term effects, but before, you say anything, the UK has been in the EU for decades, so we are indeed in the long run).
No, it was recovering the freedom that was getting eaten by Europe, and listening to the vote of the UK people again. Whether it ends up in “getting rid of foreigners” or anything else would only be a second-order result of listening to the Englishman’s vote, if that is what they still vote for in 10 years. The goal of Brexit was democracy, not particular measures left or right.
Amusing you equate democracy with the English vote. Sincerely, Scotland, Wales and NI
I’m equating democracy with listening to the most numerous. You have been thoroughly defeated with 3 blatant-majority votes in 4 years. If you don’t like it, you were never in favour of democracy, and if you are not in solidarity with your English mates, tell me about solidarity with an entire continent.
Name a single country that succeeded to leave EU without retaliation from said EU and I’ll eat my hat. EU is not a choice for most of us on the continent. We’re not free to leave, and we were manipulated into joining.
Long story short: The simple fact that it required not 1 but 3 blatant-majority votes for elites to register that yes, UK people wanted to leave EU, is a sufficient proof that EU is not listening to the most numerous.
And let’s not even talk about the quantity of funding, sponsorship and 4x3 billboards it took to swerve Scotland’s, Wales and NI in favor of EU. Manipulation is in plain sight here.
Name a single country that succeeded to leave EU without retaliation from said EU and I’ll eat my hat. EU is not a choice for most of us on the continent. We’re not free to leave, and we were manipulated into joining.
Long story short: The simple fact that it required not 1 but 3 blatant-majority votes for elites to register that yes, UK people wanted to leave EU, is a sufficient proof that EU is not listening to the most numerous.
And let’s not even talk about the quantity of funding, sponsorship and 4x3 billboards it took to swerve Scotland’s, Wales and NI in favor of EU. Manipulation is in plain sight here.
I understand there are other factors at play (to say the least) in NI, but can you explain the incentive Scotland and Wales have to stay in the UK? I'd have thought they'd be gearing up for full scale separation referendums by now.
It’s the same incentives the UK had to stay in Europe. Ninety plus percent of their trade is with each other.
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> Forgive me since I’m American, but wasn’t getting rid of foreigners taking jobs one of the selling points of Brexit?
That's what the media like to repeat, but I would suggest that you ignore them and take a broader view.
Reality is that both the UK and EU government failed to keep the population happy and continuously messed up. So much so, that the majority of people voted to leave the EU as they were discontent with their current situation. As someone who lives in the UK is that very little really has changed yet pre-brexit and post-brexit. It turns out outside of some temporary instabilities, things aren't doom and gloom. They're still crap like before though.
The only place where housing was really affordable in the UK was in Northern Ireland and sure enough, it's still very affordable in Northern Ireland.
General rule for getting on the housing ladder in the UK is the best time to buy was yesterday, the next best is now. Even if the housing market has a price crisis. It will never return to pricing to match up a decade ago; so don't live a fantasy waiting for it.
That's what the media like to repeat, but I would suggest that you ignore them and take a broader view.
Reality is that both the UK and EU government failed to keep the population happy and continuously messed up. So much so, that the majority of people voted to leave the EU as they were discontent with their current situation. As someone who lives in the UK is that very little really has changed yet pre-brexit and post-brexit. It turns out outside of some temporary instabilities, things aren't doom and gloom. They're still crap like before though.
The only place where housing was really affordable in the UK was in Northern Ireland and sure enough, it's still very affordable in Northern Ireland.
General rule for getting on the housing ladder in the UK is the best time to buy was yesterday, the next best is now. Even if the housing market has a price crisis. It will never return to pricing to match up a decade ago; so don't live a fantasy waiting for it.
And driving wages down is the answer to what, exactly?
AirBNB, second homes, and rentals aren't pushing up rents and house prices even a fraction as much as central banks artificially lowering interest rates, zoning laws, and NIMBYism.
Population growth and lower family formation rates - which is hard to blame on anyone but women actually having a choice for their own lives - are much bigger reasons for price increases than AirBNB and second homes pretty much everywhere outside of the most touristy vacation destinations.
Population growth and lower family formation rates - which is hard to blame on anyone but women actually having a choice for their own lives - are much bigger reasons for price increases than AirBNB and second homes pretty much everywhere outside of the most touristy vacation destinations.
That's a self-correcting problem, isn't it? Either those cafes and shops will raise prices and pay their staff more, or they'll close down. I've never understood why we're supposed to feel bad for "small business owners" who won't find staff when paying peanuts for their crappy jobs.
Your solution is the problem. The house prices are a blood-sucking squid, and you are pay for them every time you get a coffee or get any service - half the money is going to the labdowner that contributes nothing to the economy. That's why a coffee costs £5 and a plumber charges £100 an hour
But we have fools that celebrate rising house prices because their nominal net worth went up
But we have fools that celebrate rising house prices because their nominal net worth went up
If prices were going down would things be better? You bought a 500,000 and in ten years it will be worth 100,000 would you still make that investment?
Everyone wants prices to remain the same forever. That takes a neutral population growth or more supply
Everyone wants prices to remain the same forever. That takes a neutral population growth or more supply
Certainly yes, it would be better - the value of a car goes down, do you still make an 'investment'? No, you buy a car if you need a car, we don't call buying a car 'investment', we don't encourage people to hoard cars they don't need, it contributes nothing to the economy.
The optimal situation is for cars and houses to be as cheap as possible relative to earnings, that's what we call economic growth and improved quality of life.
The optimal situation is for cars and houses to be as cheap as possible relative to earnings, that's what we call economic growth and improved quality of life.
Housing (the structures) depreciates in Japan now of days, and so they mostly don’t have this problem.
>If prices were going down would things be better? You bought a 500,000 and in ten years it will be worth 100,000 would you still make that investment?
The idea that holding a property and doing absolutely nothing with it is an "investment" is absurd. The only people who would buy that home are those who want to live in it or who want to rent it out to someone who wants to live in it.
No I wouldn't make that "investment". I would just rent the property out without "investing" the property.
The idea that holding a property and doing absolutely nothing with it is an "investment" is absurd. The only people who would buy that home are those who want to live in it or who want to rent it out to someone who wants to live in it.
No I wouldn't make that "investment". I would just rent the property out without "investing" the property.
>investment
That's exactly the problem right there. A house can be a place to live or an investment, but not both. I myself think it's a bit to silly to spend labour and resources building a concrete box for the latter purpose, so I'd much rather houses fulfill their purpose as homes for people to live in.
That's exactly the problem right there. A house can be a place to live or an investment, but not both. I myself think it's a bit to silly to spend labour and resources building a concrete box for the latter purpose, so I'd much rather houses fulfill their purpose as homes for people to live in.
> but not both
Certainly a place to live can also be an investment.
Just like a work of art can also be an investment.
And a plumbing business can be an investment and also fix your pipes.
Certainly a place to live can also be an investment.
Just like a work of art can also be an investment.
And a plumbing business can be an investment and also fix your pipes.
You missed the point - a plumbing business is an investment, just like a construction business. But no-one buys an old set of pipes and calls that an investment, and we understand that would be dumb.
If houses are to be an investment, their prices will keep rising and they become unaffordable. When consumer goods themselves are an investment, standards of living fall
If houses are to be an investment, their prices will keep rising and they become unaffordable. When consumer goods themselves are an investment, standards of living fall
I've read that in many Asian countries houses are seen as a depreciating asset.
And I've noticed that in the US, the observations that cars are typically depreciating assets never really stopped people from buying them.
And I've noticed that in the US, the observations that cars are typically depreciating assets never really stopped people from buying them.
By this logic no one would buy food, as it drastically depreciates in a minuscule amount of time.
The real economy is the one that fulfills people's needs. Real-estate investment is parasitic to the real economy - it locks money away and artificially increases the price of a basic necessity. This has always been recognized in even basic economics with the concept of "rent-seeking" - unproductive activity that still makes money, such as literally charging rent.
The real economy is the one that fulfills people's needs. Real-estate investment is parasitic to the real economy - it locks money away and artificially increases the price of a basic necessity. This has always been recognized in even basic economics with the concept of "rent-seeking" - unproductive activity that still makes money, such as literally charging rent.
Sure, they can raise prices but the customers who paid £350,000 for their charming holiday cottage won't pay £35 for a cup of coffee. The house prices are so out of touch with the rest of the economy, there's no way to catch up for normal people. So the cafe closes.
The self correction should actually be the house price crashing, but the UK government consistently props up, and pumps, the market.
The average house price in Salcombe (Devon) is £950,000! That's 30 average salaries.
The self correction should actually be the house price crashing, but the UK government consistently props up, and pumps, the market.
The average house price in Salcombe (Devon) is £950,000! That's 30 average salaries.
We’re in a suicide spiral where fiscal policy has staved off economic malaise by kicking the can down the road.
Interest rates have been kept low, which drives real property prices up. Everyone intuitively knows that collapse or high inflation is the endgame, so money flocks to property, which drives up demand.
The issue isn’t the coffee shop in the fishing village, it’s that the fishermen are selling real estate now and nobody actually lives in the village.
You can see this in many places. Lake George, NY is a great example - beautiful village, great location, but can only support tshirt shops from Memorial Day to Labor Day. Manhattan is the same way — the Lower East Side is like a museum of what Manhattan was like, with $2M condo apartments being randomly dropped in and 1/3 of the storefronts vacant.
Interest rates have been kept low, which drives real property prices up. Everyone intuitively knows that collapse or high inflation is the endgame, so money flocks to property, which drives up demand.
The issue isn’t the coffee shop in the fishing village, it’s that the fishermen are selling real estate now and nobody actually lives in the village.
You can see this in many places. Lake George, NY is a great example - beautiful village, great location, but can only support tshirt shops from Memorial Day to Labor Day. Manhattan is the same way — the Lower East Side is like a museum of what Manhattan was like, with $2M condo apartments being randomly dropped in and 1/3 of the storefronts vacant.
Low interest rates have made everything cheap but the supply of housing (specifically land) is extremely inflexible. You can make more cars but not land. The location value of your house skyrockets at the expense of everyone else.
However, make no mistake. The problem isn't money. Even if you buy your house with Bitcoin you will run into the same problem. The problem is that location is a a monopoly. You can tax it or let it run wild.
However, make no mistake. The problem isn't money. Even if you buy your house with Bitcoin you will run into the same problem. The problem is that location is a a monopoly. You can tax it or let it run wild.
I’m not making any mistake, cheap money is absolutely the biggest problem that we have today.
My former mentor bought a house on Nantucket for $150k in 1990, sold for $3.5M earlier this year. That appreciation isn’t due to inflation or the constrained supply of homes — it’s always been constrained. It’s due to increased demand fueled by excess capital.
There’s no money in traditional banking. Even with negligible interest, the spread is very tight. The only way to compete is with volume, aggregation and fee for service, and the only way to get volume is to lower standards.
IMO, we’re in an economic time period similar to the 1860’s.
My former mentor bought a house on Nantucket for $150k in 1990, sold for $3.5M earlier this year. That appreciation isn’t due to inflation or the constrained supply of homes — it’s always been constrained. It’s due to increased demand fueled by excess capital.
There’s no money in traditional banking. Even with negligible interest, the spread is very tight. The only way to compete is with volume, aggregation and fee for service, and the only way to get volume is to lower standards.
IMO, we’re in an economic time period similar to the 1860’s.
> My former mentor bought a house on Nantucket for $150k in 1990, sold for $3.5M earlier this year.
That is literally a luxury good with a fixed supply. As the # of people who desire that good has sky rocketed generation to generation, of course the price went up.
There are limited production run cars from that era that underwent similar price inflation.
For someone who wants to live in Nantucket, there is literally no substitutable good!
That is literally a luxury good with a fixed supply. As the # of people who desire that good has sky rocketed generation to generation, of course the price went up.
There are limited production run cars from that era that underwent similar price inflation.
For someone who wants to live in Nantucket, there is literally no substitutable good!
> That is literally a luxury good with a fixed supply. As the # of people who desire that good has sky rocketed generation to generation, of course the price went up.
We’re arguing the same thing. Everyone wants to go to the beach. The ability to get cash to do so increased demand.
We’re arguing the same thing. Everyone wants to go to the beach. The ability to get cash to do so increased demand.
But the number of people that can pay 3.5 million dollars for an house is much smaller than the number of people that can take have a 3.5 million house financed. If interest rates were sufficiently low (maybe negative) everybody would be in the second category.
Having more people willing to pay contributes to price increases
Having more people willing to pay contributes to price increases
Not a 19th century scholar; can you provide a couple links to the current situation?
Or reference the points you are trying to make to make it easier to search? For instance, most of my results right now are pertaining to the civil war economies of the north / south United States
Or reference the points you are trying to make to make it easier to search? For instance, most of my results right now are pertaining to the civil war economies of the north / south United States
Sure, I’d start here. https://en.m.wikipedia.org/wiki/Long_Depression
I think the the internet and technology is the equivalent to the railroads and industrialization in the 19th century. You also have the currency issues with silver and gold standards which may play out similarly to some of the crypto issues of today.
I’ve worked in a large enterprise for a long time, going from project to project that essentially automated away some semi-professional human work with automation at a 50-90% savings. Over 15 years, there’s about 35% fewer people doing 50% more work.
That trend is only speeding up. I don’t see how the current model of using cheap money to prop up real estate is a sustainable economic model.
Take with appropriate grain of salt. I’m not an economist, and my understanding is that of a layman.
I think the the internet and technology is the equivalent to the railroads and industrialization in the 19th century. You also have the currency issues with silver and gold standards which may play out similarly to some of the crypto issues of today.
I’ve worked in a large enterprise for a long time, going from project to project that essentially automated away some semi-professional human work with automation at a 50-90% savings. Over 15 years, there’s about 35% fewer people doing 50% more work.
That trend is only speeding up. I don’t see how the current model of using cheap money to prop up real estate is a sustainable economic model.
Take with appropriate grain of salt. I’m not an economist, and my understanding is that of a layman.
> You can make more cars but not land.
Lots of land exists, the issue is desirable cities, and western countries have gotten really bad at making those.
China spent the first decade of the 21st century creating urban cities left and right, ignore the western propaganda of "ghost cities", and also spent time urbanizing what America would consider "suburban" towns.
Meanwhile western nations are dead set on never increasing the # of desirable urban environments, and then it is all surprise Pikachu when house prices skyrocket.
Lots of land exists, the issue is desirable cities, and western countries have gotten really bad at making those.
China spent the first decade of the 21st century creating urban cities left and right, ignore the western propaganda of "ghost cities", and also spent time urbanizing what America would consider "suburban" towns.
Meanwhile western nations are dead set on never increasing the # of desirable urban environments, and then it is all surprise Pikachu when house prices skyrocket.
Whole states like Idaho and Utah have seen skyrocketing prices for homes- this is in no way limited to specific urban environments.
If we take out the pandemic impact, does that still hold true for Utah and Idaho?
> If we take out the pandemic impact
How do you reliably isolate the effect of the pandemic from other effects occurring at the same time?
How do you reliably isolate the effect of the pandemic from other effects occurring at the same time?
Nothing that a wealth tax on the current value of land won't fix. Make property taxes to the value of the number of people that land should support in a highrise configuration, and let the current owners pay it.
You think those small business owners are packing away substantial profits they could use to pay staff significantly more?
If a business can only exist by having serfs it wildly underpays then maybe it deserves to lose out to the big chains.
Compared to a small business the "big chains" might be able to operate with smaller profit margins, or have lower non-labor costs, or profit from owned real estate, but it isn't enough for long term viability. Excessive rents are going to turn any neighbourhood into a desert like South Kensington.
Big chains aren't exactly known for treating unskilled workers with kids gloves. Amazon comes to mind, as does Walmart.
And yet they pay substantially better wages with better benefits on average. Even labor law compliance is much better (not to mention that small businesses are exempt from many regulations in the first place).
Not sure about that. The benefits are better and more structured and there are multitudes of articles about how they are much much harder to access, leaving most workers partially dependent on state benefits
Mom and pop shops often just don't offer benefits at all. Go slightly bigger and they'll have a health plan that's easy to enroll in but the premiums and co-pays will make your eyes water.
Thats true, but they also arent usually sophisticated enough to use a LEAN scheduling approach and combine it with budgeted hours that keep you under the benefits line + an approach of expendability to their workers.
Until one of us creates a free-ish software to help them do that ofc.
Until one of us creates a free-ish software to help them do that ofc.
Or they could turn to automation, eliminate their labor costs substantially. Eg that cafe can turn into a bunch of vending machines.
Sure, they could do that too.
From my gut feeling it doesn't seem that small business owners actually get the funding they deserve from banks. Only big businesses actually get those low interest rates.
The point is that before there existed an ecosystem. That “peanuts” is what the business owner was able to afford to pay which was enough for the employees to make a somewhat decent living. Now that isn’t possible anymore. The objection is to the change/disruption of a local ecosystem by outsiders.
Blaming outsiders - classic strategy, can’t go wrong!
We are blaming outsiders for giving us too much money. Where is all that money going if not into the hands of locals who are selling their property?
Consider a community of 10000 households. 5000 rent their housing, 4500 own their own place, and 500 own more than one place. Now outsiders enter the picture and buy property driving up the prices. The 5000 renting households are now in trouble. If rents go up they are squeezed that way. With rent control there are still issues: Their kids are unable to move out, and separations become tricky. For the 4500 it's a mixed bag. They have the same issues with splitting the household, but they also have advantages. They can do a reverse mortgage and live well. Or they call sell and live well elsewhere. For the 500 elite households it's a pure win, they can buy more yachts than before.
> Now outsiders enter the picture and buy property
Buy it from who? Locals. So who gets the money? Locals.
But anyway the point was don’t divide people into insiders and ‘outsiders’.
Buy it from who? Locals. So who gets the money? Locals.
But anyway the point was don’t divide people into insiders and ‘outsiders’.
In the scenarion the 5000 were renting houses from the 500, so probably the outsiders would buy those properties first.
The 500 are also the most likely not to be local or own the land (which means a single sale can convert a low cost apartament building in a mansion).
Also the reverse is possible...
The 500 are also the most likely not to be local or own the land (which means a single sale can convert a low cost apartament building in a mansion).
Also the reverse is possible...
> spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on.
South Kensington is a bit of a curiosity.
It is predominantly bordered by Chelsea and Knightsbridge.
Chelsea is Russian country, if you are a wealthy Russian, Chelsea is the place to be. Unless you are a Russian oligarch, in which case there are one or two spots a bit further away where you can splash super serious cash on rarer properties.
Knightsbridge is wealthy Arab country, when it gets too hot in the Middle East summer, they flock to Knightsbridge with their imported Ferraris to stay in their London houses.
But South Kensington is a bit different. Its not attractive to the Russians or Arabs. Not many of the properties there remain single occupant, they've been mostly subdivided in to individual flats or re-purposed for office (or educational use ... there are lots of cram-schools, colleges and nurseries round there).
South Kensington is a bit of a curiosity.
It is predominantly bordered by Chelsea and Knightsbridge.
Chelsea is Russian country, if you are a wealthy Russian, Chelsea is the place to be. Unless you are a Russian oligarch, in which case there are one or two spots a bit further away where you can splash super serious cash on rarer properties.
Knightsbridge is wealthy Arab country, when it gets too hot in the Middle East summer, they flock to Knightsbridge with their imported Ferraris to stay in their London houses.
But South Kensington is a bit different. Its not attractive to the Russians or Arabs. Not many of the properties there remain single occupant, they've been mostly subdivided in to individual flats or re-purposed for office (or educational use ... there are lots of cram-schools, colleges and nurseries round there).
What about Notting hill, a bedsit can go for 2000 quid per week there, it's in Kensington.
Average London rent prices are 1600 quid, that is before council tax, internet and the dreaded tv licence.
A more granular overview is
Location Studio One bedroom
Kensington and Chelsea £1,427 £2,062
Islington £1,383 £1,565
Tower Hamlets £1,398 £1,547
Westminster £1,371 £2,113
Lambeth £1,240 £1,595
One bedroom is not sufficient to raise a family, I think that's safe to say.
So let's move on to the 2 and 3 bedroom properties
Location Ttwo br 3Wbr swestmisnster£ 2,920 £4,152 Camden £ 2,254 £2,880 Kensingtonelsea £3,030 £4,938 Islington £1,934 £2,487
Hammersmith a 1,922 £2,653
Sorry for the formatting.
Cheapest
BBexley£. 1,105 £1,281 Havering £1,120 £1,384 Redbridge £1,293 £1,589 Sutton £ 1,163 £1,498 Waltham Forest £1,364 £1,649
These are before council tax and other costs, which are gonna be laughed at by oligarchs but they do count for normal people.
The new houses nnextto Westfield shopping centre cost around 2000 quid before council tax , zone 3 classic houses with a garden go for 1500 before council tax. its really bad in all London, unless you make 50k after taxes and most devs don't make that money there. t
One bedroom is not sufficient to raise a family, I think that's safe to say.
So let's move on to the 2 and 3 bedroom properties
Location Ttwo br 3Wbr swestmisnster£ 2,920 £4,152 Camden £ 2,254 £2,880 Kensingtonelsea £3,030 £4,938 Islington £1,934 £2,487
Hammersmith a 1,922 £2,653
Sorry for the formatting.
Cheapest
BBexley£. 1,105 £1,281 Havering £1,120 £1,384 Redbridge £1,293 £1,589 Sutton £ 1,163 £1,498 Waltham Forest £1,364 £1,649
These are before council tax and other costs, which are gonna be laughed at by oligarchs but they do count for normal people.
The new houses nnextto Westfield shopping centre cost around 2000 quid before council tax , zone 3 classic houses with a garden go for 1500 before council tax. its really bad in all London, unless you make 50k after taxes and most devs don't make that money there. t
> its really bad in all London
I don't disagree with you there.
Aside from the Chelsea and Knightsbridge style stories, overall London suffers from a problem of (a) too much buy-to-let nonsense going on (b) off-plan new-build developments which are sold off-plan predominantly to offshore buyers (mostly Chinese using it as a way to get chunks of money out of China, but also other nationalities too). All those new-builds South of the River for example, almost exclusively off-plan jobs.
The present government is not helping either. They are unashamedly on the side of the property developers out there to make a quick buck, not Londoners.
I absolutely do feel for those on low / minimum wage in London who are pushed out of the market and having to face horrible commutes to be able to live somewhere remotely affordable.
I don't disagree with you there.
Aside from the Chelsea and Knightsbridge style stories, overall London suffers from a problem of (a) too much buy-to-let nonsense going on (b) off-plan new-build developments which are sold off-plan predominantly to offshore buyers (mostly Chinese using it as a way to get chunks of money out of China, but also other nationalities too). All those new-builds South of the River for example, almost exclusively off-plan jobs.
The present government is not helping either. They are unashamedly on the side of the property developers out there to make a quick buck, not Londoners.
I absolutely do feel for those on low / minimum wage in London who are pushed out of the market and having to face horrible commutes to be able to live somewhere remotely affordable.
Yeah a lot are not residential, a lot of those that are are subdivided into flats, and a chunk of those that remain may just not be occupied outside term time or during a pandemic.
But mostly it's that they're not residential to begin with. Many more are linked to an embassy, restaurants, clubs, nurseries, storage, etc. than you'd realise from 'walking back to hotel at night'.
But mostly it's that they're not residential to begin with. Many more are linked to an embassy, restaurants, clubs, nurseries, storage, etc. than you'd realise from 'walking back to hotel at night'.
Not sure why the amen is applicable to Dutch cities. I'll take the local perspective from Amsterdam as an example, but it applies more broadly to the other cities as well here.
Regarding point 1:
There's no real issues with long-term vacancies (the municipality already has laws in-place which fine owners of vacant homes), typically sits between 1 and 2%. That should obviously go down to 0 as much as possible, but it's clear that (1) the problem has an extremely minor effect on the market, (2) it's not exclusively caused by investors, a lot of them are pied-a-terres or homes owned by temporary migrants working abroad and (3) the problem of vacant homes that can be attributed to investors, can be addressed in many other ways than a total ban.
In other words, not an effective or suitable policy on this point.
Regarding point 2:
The price increases aren't caused by investors in Amsterdam, studies have shown this over and over again. If buy-to-let is banned, rental supply drops, rental prices go in overdrive, and there'll be more pressure to buy under any circumstance. The have-nots who're unable to buy will be even worse off. There's no magical panacea to a lack of sufficient supply.
You mention a couple points around 2nd homes, which are fair. I think in a world where there isn't enough housing for everyone, we should at minimum disincentivize owning second homes that go unused most of the time. But apart from the fact that Amsterdam is the capital, a working town, not a place where people have second homes that they enjoy on the weekend, this policy doesn't address 2nd homes at all. You're not banned from buying and owning a 2nd home in Amsterdam after this policy goes into effect.
In other words, an entirely ineffective policy regarding point 2.
Regarding point 1:
There's no real issues with long-term vacancies (the municipality already has laws in-place which fine owners of vacant homes), typically sits between 1 and 2%. That should obviously go down to 0 as much as possible, but it's clear that (1) the problem has an extremely minor effect on the market, (2) it's not exclusively caused by investors, a lot of them are pied-a-terres or homes owned by temporary migrants working abroad and (3) the problem of vacant homes that can be attributed to investors, can be addressed in many other ways than a total ban.
In other words, not an effective or suitable policy on this point.
Regarding point 2:
The price increases aren't caused by investors in Amsterdam, studies have shown this over and over again. If buy-to-let is banned, rental supply drops, rental prices go in overdrive, and there'll be more pressure to buy under any circumstance. The have-nots who're unable to buy will be even worse off. There's no magical panacea to a lack of sufficient supply.
You mention a couple points around 2nd homes, which are fair. I think in a world where there isn't enough housing for everyone, we should at minimum disincentivize owning second homes that go unused most of the time. But apart from the fact that Amsterdam is the capital, a working town, not a place where people have second homes that they enjoy on the weekend, this policy doesn't address 2nd homes at all. You're not banned from buying and owning a 2nd home in Amsterdam after this policy goes into effect.
In other words, an entirely ineffective policy regarding point 2.
Show your sources. I've read the exact opposite of what you claim.
The CIA even lists the Dutch housing market as the largest risk factor in the stability of the Dutch housing market.
The CIA even lists the Dutch housing market as the largest risk factor in the stability of the Dutch housing market.
> Show your sources. I've read the exact opposite of what you claim.
For example: https://www.kadaster.nl/documents/1953498/3407456/Onderzoek+...
Happy to read your sources as well.
> The CIA even lists the Dutch housing market as the largest risk factor in the stability of the Dutch housing market.
I don't understand?
For example: https://www.kadaster.nl/documents/1953498/3407456/Onderzoek+...
Happy to read your sources as well.
> The CIA even lists the Dutch housing market as the largest risk factor in the stability of the Dutch housing market.
I don't understand?
The problem is not only in Amsterdam, and for anybody wondering how crazy the situation is at the moment this is a realistic, up to date view:
"The WILD Dutch housing market and our home buying flop | American in the Netherlands"
https://youtu.be/dFXsfeEEVAM
"The WILD Dutch housing market and our home buying flop | American in the Netherlands"
https://youtu.be/dFXsfeEEVAM
> If buy-to-let is banned, rental supply drops
This seems to contradict your earlier claim that:
> the municipality already has laws in-place which fine owners of vacant homes
This seems to contradict your earlier claim that:
> the municipality already has laws in-place which fine owners of vacant homes
A house which is being rented isn’t vacant.
I don't see the contradiction, could you explain?
If "rental supply drops", that means the people who own apartments they don't live in won't let them out. If they don't let them out, they're subject to the anti-empty-apartment laws.
[deleted]
The problem is that there can be NO new rentals on the market, because you can’t buy a home and rent it out. If someone is renting out a property and then decides to sell it, that is one less rental on the market that can’t be replaced. Any house that is bought can’t be rented out ever, so there is no new rentals.
No, the owners who are grandfathered in rub their hand in glee, as over time only own-to-occupy buyers are allowed, thus the supply of rentals goes down and rentals become more expensive, thus making their rents higher and more lucrative.
The answer is to reduce the centralization of jobs and other factors that cause everyone to want to live in Amsterdam, e.g. building out Lelystad or Buitenveldert. To a certain extent, COVID and WFH has started doing that.
I lived in Amsterdam in 1999 and house prices there seemed quite reasonable to me compared to Paris where I was coming from, but of course many things may have changed in two decades.
The answer is to reduce the centralization of jobs and other factors that cause everyone to want to live in Amsterdam, e.g. building out Lelystad or Buitenveldert. To a certain extent, COVID and WFH has started doing that.
I lived in Amsterdam in 1999 and house prices there seemed quite reasonable to me compared to Paris where I was coming from, but of course many things may have changed in two decades.
> thus the supply of rentals goes down
You're sort of "begging the question" here.
> The answer is to reduce the centralization of jobs and other factors that cause everyone to want to live in Amsterdam
Obviously I'm not against that happening but it's not either-or.
> but of course many things may have changed in two decades.
Oh, you have no idea. It was hard to even get the owners to get back to you, because they'd already accepted an offer; and I was being asked for 1,500 EUR - 1,650 EUR/month for a bedroom+living room apartment. And while that wasn't in Diemen or Bijlmer, they weren't in posh super-central locations.
You're sort of "begging the question" here.
> The answer is to reduce the centralization of jobs and other factors that cause everyone to want to live in Amsterdam
Obviously I'm not against that happening but it's not either-or.
> but of course many things may have changed in two decades.
Oh, you have no idea. It was hard to even get the owners to get back to you, because they'd already accepted an offer; and I was being asked for 1,500 EUR - 1,650 EUR/month for a bedroom+living room apartment. And while that wasn't in Diemen or Bijlmer, they weren't in posh super-central locations.
The Netherlands is just too rich that it is working against itself. We have created a society where every person wants their own house- 17 million people 10 million houses. And the Netherlands is a magnet for migrants- compared to most of the world the streets are paved with gold.
And no matter how much the prices go up people can and will pay. Unless there's a mayor economic recession things will not get better.
And no matter how much the prices go up people can and will pay. Unless there's a mayor economic recession things will not get better.
> 17 million people 10 million houses
Wait, you’re making it sound like this is an obvious case of not enough supply — which could potentially be solved by building more homes! — but in fact, it’s the total opposite: the average Dutch household has 2.14 people, so that’s 8 million households vs. 10 million houses! (I assume this is overwhelmingly folks who want to live together: partners, kids, etc., not just folks who can’t afford to live alone.)
Sounds to me like there are 2 million extra houses, not 7 million missing ones.
So what, exactly, causes the problem? Presumably, those 2m extra houses just aren’t in the right places?
Wait, you’re making it sound like this is an obvious case of not enough supply — which could potentially be solved by building more homes! — but in fact, it’s the total opposite: the average Dutch household has 2.14 people, so that’s 8 million households vs. 10 million houses! (I assume this is overwhelmingly folks who want to live together: partners, kids, etc., not just folks who can’t afford to live alone.)
Sounds to me like there are 2 million extra houses, not 7 million missing ones.
So what, exactly, causes the problem? Presumably, those 2m extra houses just aren’t in the right places?
there are 7.9 million homes in NL. The shortage is 279.000 vs 331.000 before corona (killing 18.035)
2.14 per home vs 3.54 in 1961.
I have no explanation why 17280000 / 7900000 = 2.187
2.14 per home vs 3.54 in 1961.
I have no explanation why 17280000 / 7900000 = 2.187
People pay because it is still the best choice for the non-financially-savvy to secure their net worth given the policies our government has made the past few years. Someone else already explained how renting costs way more, and people would argue the break-even point for renting vs buying is only about 1 to 2 years. That's without taking into account all the restrictions landlords are putting up.
Once you get past the hurdle, banks give you insane amounts of money to buy these insanely priced houses with. And due to the low rent, you're not that much worse off than 5 years ago. Since no one who buys a house today wants to end up losing out, many homeowners will vehemently oppose any measure which could make the prices sink, so more borrowed money, so even higher prices as long as there isn't a suitable alternative (cheaper/affordable and easy to attain rent).
Once you get past the hurdle, banks give you insane amounts of money to buy these insanely priced houses with. And due to the low rent, you're not that much worse off than 5 years ago. Since no one who buys a house today wants to end up losing out, many homeowners will vehemently oppose any measure which could make the prices sink, so more borrowed money, so even higher prices as long as there isn't a suitable alternative (cheaper/affordable and easy to attain rent).
Studies have shown that in the Netherlands only a tiny part of the rapidly increasing price is due to shortage and the majority due to investers. The exact opposite of what you say.
I'm not saying you are wrong. I'm saying that what you pose as established facts are highly debated in the Netherlands at the least.
I'm on mobile, so finding English studies is hard. Maybe parent author could cite some of the studies (s)he mentions? https://www.eigenhuis.nl/huis-kopen/starters/artikelen/beleg... https://www.kadaster.nl/-/opkomst-particuliere-investeerders...
I'm not saying you are wrong. I'm saying that what you pose as established facts are highly debated in the Netherlands at the least.
I'm on mobile, so finding English studies is hard. Maybe parent author could cite some of the studies (s)he mentions? https://www.eigenhuis.nl/huis-kopen/starters/artikelen/beleg... https://www.kadaster.nl/-/opkomst-particuliere-investeerders...
So the study you referenced was ordered by the Minister of the Interior, and it's been the most heavily cited study in the past few years.
If you read it, you'll find it explicitly states they could not establish a causal relationship between investors and increased prices. (i.e. it says exactly what I stated).
They do find a correlation (which is heavily referenced in the news and misinterpreted), which would be expected. Investors who study the market and are investing professionally, are more likely than the average, and definitely more likely than below-average, to invest in neighbourhoods which turn out to see more price increases than neighbourhoods that investors chose not to invest in. That's of course because it's their job and their expertise. It doesn't mean they're causing the price increases.
It's a bit like saying there's a correlation in prices between prices of stocks of companies that professional investors choose to invest in or not. That's obvious, professional investors seek returns, and are expected to invest in such companies. But the investors aren't causing the tech stocks to become valuable. They simply are, by way of their profits. Google (once established) isn't high-value because investors choose to buy its shares. Investors detect the value and pursue to own it. Real estate is no different. Which is why the study found a correlation, but explicitly did not establish a causal relationship.
If you read it, you'll find it explicitly states they could not establish a causal relationship between investors and increased prices. (i.e. it says exactly what I stated).
They do find a correlation (which is heavily referenced in the news and misinterpreted), which would be expected. Investors who study the market and are investing professionally, are more likely than the average, and definitely more likely than below-average, to invest in neighbourhoods which turn out to see more price increases than neighbourhoods that investors chose not to invest in. That's of course because it's their job and their expertise. It doesn't mean they're causing the price increases.
It's a bit like saying there's a correlation in prices between prices of stocks of companies that professional investors choose to invest in or not. That's obvious, professional investors seek returns, and are expected to invest in such companies. But the investors aren't causing the tech stocks to become valuable. They simply are, by way of their profits. Google (once established) isn't high-value because investors choose to buy its shares. Investors detect the value and pursue to own it. Real estate is no different. Which is why the study found a correlation, but explicitly did not establish a causal relationship.
About point two:
Both supply and demand are incredibly constrained: building new houses is slow and not exactly being stimulated by the government, whereas demand is fixed because people need a place to live.
Property rental is an extremely attractive investment opportunity. Demand is guaranteed and due to the low cost of obtaining money it is basically risk-free. Even at near-zero rent you'll still make a profit - as long as the housing market doesn't crash.
On the other hand mortgages always carry some risk, and banks are aware of this. There are quite strict limitations on the amount you are allowed to borrow. This directly means that individuals will always be outbid by investors.
This directly results in price increases. Individuals are now no longer able to buy a home, forcing them to rent. Landlords, in turn, are happy to let you rent a property which you wouldn't be able to afford because it is way easier to evict you. And because demand is higher than supply, they'll happily increase the price. Rent prices are already in overdrive.
So now you're paying €1200 in rent instead of €800 in mortgage payment - for the same property.
Banning buy-to-let would result in a sale of the properties currently being rented out - which means a drop in the housing price. Rental supply will drop, but those houses don't magically disappear! People who previously were unable to get a mortgage can now suddenly afford to buy instead of rent. This lowers the demand for rentals, which decreases rent.
People don't need landlords - they need homes. With the exception of a very small number of short-term rentals, landlords provide zero value. Removing them from the equation decreases the prices for everyone.
Both supply and demand are incredibly constrained: building new houses is slow and not exactly being stimulated by the government, whereas demand is fixed because people need a place to live.
Property rental is an extremely attractive investment opportunity. Demand is guaranteed and due to the low cost of obtaining money it is basically risk-free. Even at near-zero rent you'll still make a profit - as long as the housing market doesn't crash.
On the other hand mortgages always carry some risk, and banks are aware of this. There are quite strict limitations on the amount you are allowed to borrow. This directly means that individuals will always be outbid by investors.
This directly results in price increases. Individuals are now no longer able to buy a home, forcing them to rent. Landlords, in turn, are happy to let you rent a property which you wouldn't be able to afford because it is way easier to evict you. And because demand is higher than supply, they'll happily increase the price. Rent prices are already in overdrive.
So now you're paying €1200 in rent instead of €800 in mortgage payment - for the same property.
Banning buy-to-let would result in a sale of the properties currently being rented out - which means a drop in the housing price. Rental supply will drop, but those houses don't magically disappear! People who previously were unable to get a mortgage can now suddenly afford to buy instead of rent. This lowers the demand for rentals, which decreases rent.
People don't need landlords - they need homes. With the exception of a very small number of short-term rentals, landlords provide zero value. Removing them from the equation decreases the prices for everyone.
Your first point is a misleading anecdote given there's actually data on this. The amount of empty homes in London is at a historical low [1]. Broadly, cities with the highest amount of empty homes tend to have the most affordable housing, because obviously that indicates there's more than enough housing to go round.
[1] https://i.imgur.com/jX1OpmS.png
[1] https://i.imgur.com/jX1OpmS.png
It also depends what we call "empty house". Your link doesn't provide a definition. Is a house occupied a few weeks a year considered empty?
True, but citing data from 2017 is also a little misleading, considering theirs was a very recent anecdote. It's still probably relevant though.
Contra:
> The Square Mile has the highest percentage of empty homes in the entire country, fresh data states.
> Some 42.4 properties per 1,000 sit unused in the City of London, leaving it top of the charts and the only London authority to feature in the nationwide top 10.
> Data compiled by insurer Admiral also shows that as many as 29,242 London homes have been unoccupied for at least six months, to a collective value of roughly £15 billion.
* https://www.citymatters.london/vacant-homes-city-london/
> The Square Mile has the highest percentage of empty homes in the entire country, fresh data states.
> Some 42.4 properties per 1,000 sit unused in the City of London, leaving it top of the charts and the only London authority to feature in the nationwide top 10.
> Data compiled by insurer Admiral also shows that as many as 29,242 London homes have been unoccupied for at least six months, to a collective value of roughly £15 billion.
* https://www.citymatters.london/vacant-homes-city-london/
4.2% is a lot less than 70%.
That's because real vacancy (as in, untenanted) only makes up a small percentage of the empty houses. The rest are owned by wealthy foreigners who reside there a few weeks in the summer and leave it to the care of a caretaker (who does not live there of course) for the rest of the year. Some of the obscenely wealthy may even have a live in concierge who lives in his own rooms keeping the rest of the house ready for its owners all year round.
> walking back to hotel at night, only about 30% of houses had any lights on.
I wish a data scientist at utilities (water, electricity and gas) providers pick up this line and provide some statistics on this. I wish also that city-services companies (e.g. Electricity/water/parking service provider) can collaborate to provide better and justified policy making.
I did similar studies based on open data to provide insights on road/sidewalk optimization usage, and I still see value in collaboration with policy makers.
I wish a data scientist at utilities (water, electricity and gas) providers pick up this line and provide some statistics on this. I wish also that city-services companies (e.g. Electricity/water/parking service provider) can collaborate to provide better and justified policy making.
I did similar studies based on open data to provide insights on road/sidewalk optimization usage, and I still see value in collaboration with policy makers.
There's an organisation called Prosper Australia that does analysis of 'speculative vacancies' in Melbourne using water consumption data: https://www.prosper.org.au/wp-content/uploads/2021/01/Prospe...
Pirates tried to investigate the situation from this angle only to be publicly shamed for being commies, spying on people. They only wanted district aggregate statistics.
I mean, it’s an easily fixable problem.
Punitively heavy land taxes on non-primary dwellings solves this overnight. It also raises a lot of capital that can be used to provide services in the area.
Punitively heavy land taxes on non-primary dwellings solves this overnight. It also raises a lot of capital that can be used to provide services in the area.
Unfortunately the wealthy tend not to want to be taxed and they're not averse to fighting back. They've learned that they need to lobby even small local tax-raising authorities to obstruct these kinds of actions. In Wales, local authorities are allowed to raise a local tax premium of up to 100% on holiday homes [1], but few, if any, charge a premium of more than 50%, even in affected areas considered to be in crisis. There's also a loophole that a second home can be declared as a holiday rental property business, without any real intention of letting it out. Welsh authorities work hard to police this by asking to review evidence of lettings (I know this as I own a legit holiday rental property in an affected area) but the enforcers need extra funding to police the tax dodgers.
I don't dispute your underlying point that punitive taxes are a big part of the solution, but I take issue that it's an easy or overnight fix unfortunately because of the interests aligned against imposing them.
[1] https://gov.wales/welsh-government-announces-three-pronged-a...
I don't dispute your underlying point that punitive taxes are a big part of the solution, but I take issue that it's an easy or overnight fix unfortunately because of the interests aligned against imposing them.
[1] https://gov.wales/welsh-government-announces-three-pronged-a...
The fundamental problem isn't that investors vote against land value taxes. The problem is that the small homeowner doesn't want to pay them either so he will vote for the benefit of the investors.
Use the money for a basic income.
Yes and no. Yes, your proposal can solve the problem for sure. No, you just can hardly implement it anytime soon.
I'm in Australia and Labor lost last election just because they were swearing to remove so called NG(Negative-Gearing, which allows the property investors to offset their income with losses from investment property) before the ballot day, despite NG itself is actually a bizarre idea: why would tax payers cover the asses of the property investors and what's more, in fair amount of NG claims, the so claimed losses were not actually rendered but rather losses in accounting term. If you opt to a different accounting method, they were actually making a profit.
So your proposal will for sure hurt those vested interests, and I would expect it be very hard to pass the parliament. It's great to see Dutch cities actually made that far, I'll keep my eyes wide open to see what's next for them.
So your proposal will for sure hurt those vested interests, and I would expect it be very hard to pass the parliament. It's great to see Dutch cities actually made that far, I'll keep my eyes wide open to see what's next for them.
You made negative gearing sound so bizarre, but it's really just business investment deductions, which applies to every type of investment, not just real estate.
If your business made a loss, you get to deduct that loss from your revenue, before getting taxed.
This is the exact same concept, but applied to investment properties. As for the "dodgy" accounting methods - it's not really dodgy, but merely depreciation of the property at play. Depreciation is real. After all, a house doesn't last forever, so why shouldn't depreciation be allowed for investment properties when it is allowed for all other business capital expenditure?
People like to argue that by taking away negative gearing for property (i.e., treat it differently), that it would increase affordability. It won't make a big difference.
If your business made a loss, you get to deduct that loss from your revenue, before getting taxed.
This is the exact same concept, but applied to investment properties. As for the "dodgy" accounting methods - it's not really dodgy, but merely depreciation of the property at play. Depreciation is real. After all, a house doesn't last forever, so why shouldn't depreciation be allowed for investment properties when it is allowed for all other business capital expenditure?
People like to argue that by taking away negative gearing for property (i.e., treat it differently), that it would increase affordability. It won't make a big difference.
> Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.
That was the case. A colleague of mine, originally from St Just, moved to London for work as so many have to do. Another from near Cockermouth did the same. Both now work remotely full time from their 'home towns' on decent wages.
Covid has done wonders for local communities - good jobs are now available for people without having to move across the country.
https://www.rightmove.co.uk/properties/112353359 for example is under £300k. Assuming you got it for 300k (asking price is 285k) with a 15k deposit you're looking at £1,278.19 a month with nationwide on a 30 year rate, well within the range of a couple earning £35k each, which is a reasonable
Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
That was the case. A colleague of mine, originally from St Just, moved to London for work as so many have to do. Another from near Cockermouth did the same. Both now work remotely full time from their 'home towns' on decent wages.
Covid has done wonders for local communities - good jobs are now available for people without having to move across the country.
https://www.rightmove.co.uk/properties/112353359 for example is under £300k. Assuming you got it for 300k (asking price is 285k) with a 15k deposit you're looking at £1,278.19 a month with nationwide on a 30 year rate, well within the range of a couple earning £35k each, which is a reasonable
Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot. £1,278/month is well outside the range for a lot of working class and even middle class families. The median gross salary in Cornwall was £27,223 in 2020.
I'm baffled by your comment to be honest; not very long ago I could buy a house in Bristol for the same or less.
I'm baffled by your comment to be honest; not very long ago I could buy a house in Bristol for the same or less.
> For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot.
Not really, people want to live there, and can now live there while working in a decent job, raise a family, send kids to school, etc.
Without remote work, villages like that are meaningless. Communication and social changes caused by covid have allowed people to actually live in remote villages.
> For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot.
Not really, people want to live there, and can now live there while working in a decent job, raise a family, send kids to school, etc.
Without remote work, villages like that are meaningless. Communication and social changes caused by covid have allowed people to actually live in remote villages.
House prices have shot up since the mid 90s as they become more affordable. A new 3 bed home in say east anglia is more affordable now (compared with median wages) than it was in 1980, despite being far far more expensive to buy. That's because
1) Most households have two incomes rather than one 2) Interest rates are much lower
House prices rise to the level people are able to pay for them. Remote work has allowed people to live in villages like St Just and continue in a decent job, which is great. Before it was mainly retirees and holiday owners, neither of which were good for the area.
Not really, people want to live there, and can now live there while working in a decent job, raise a family, send kids to school, etc.
Without remote work, villages like that are meaningless. Communication and social changes caused by covid have allowed people to actually live in remote villages.
> For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot.
Not really, people want to live there, and can now live there while working in a decent job, raise a family, send kids to school, etc.
Without remote work, villages like that are meaningless. Communication and social changes caused by covid have allowed people to actually live in remote villages.
House prices have shot up since the mid 90s as they become more affordable. A new 3 bed home in say east anglia is more affordable now (compared with median wages) than it was in 1980, despite being far far more expensive to buy. That's because
1) Most households have two incomes rather than one 2) Interest rates are much lower
House prices rise to the level people are able to pay for them. Remote work has allowed people to live in villages like St Just and continue in a decent job, which is great. Before it was mainly retirees and holiday owners, neither of which were good for the area.
Median post-tax household income in the UK is £30k. So, £25k each is roughly £20k post-tax, so you're looking at the top 30% of households.
Admittedly this includes households including people who are "retired" but I think that's reasonable as plenty of people have to keep working even though they're receiving a pension.
https://www.ons.gov.uk/peoplepopulationandcommunity/personal...
Admittedly this includes households including people who are "retired" but I think that's reasonable as plenty of people have to keep working even though they're receiving a pension.
https://www.ons.gov.uk/peoplepopulationandcommunity/personal...
Median weekly earnings for full-time employees reached £585 in April 2019, an increase of 2.9% since April 2018 [0]
That's £30k a year.
[0] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwor...
That's £30k a year.
[0] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwor...
> Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
This horrifies me. Even the slightest increase in interest rates will ruin a huge number of home owners.
On the other hand, home ownership in the UK isn’t normal either. It’s only since the 50s or perhaps 60s that the average person has been able to afford a home. And then again in the 80s with council houses sold off to tenants.
This horrifies me. Even the slightest increase in interest rates will ruin a huge number of home owners.
On the other hand, home ownership in the UK isn’t normal either. It’s only since the 50s or perhaps 60s that the average person has been able to afford a home. And then again in the 80s with council houses sold off to tenants.
Usually mortgages are a fixed rate for the life of the loan (usually 30 years) -- at least here in the USA. Variable rate (eg "ARM") mortgages are also available but are less common and mostly used for short term flipping and the like, for the very reason you say -- nobody wants to risk a rising payment due to rising rates.
Is the situation very different in the UK? Do Britishers actually prefer variable rate mortgages for some bizarre reason?
Edit: I did my own research and was shocked to find that in the UK it sounds like variable is indeed more or at least as common as fixed and that even fixed tends to be fixed only for the first 5-10 years!This is the opposite of the US, where I know someone on a normal middle class circumstance who just secured a 3.25% 30 year fixed mortgage, and this is extremely common right now if you have good credit. Even the "scary and risky" variable mortgages in America are things like a 5/1 ARM which is fixed for the first 5 years, which sound like they'd be relatively low risk for the UK!
I am baffled. Is the great advantage for the American homeowner simply due to the wages of empire, ie dollar supremacy? Federal policy favoring homeowners? Or what? I did always wonder how banks could afford to provide such a good deal.
This is a vast difference really worth wondering about; I hope someone has some insight.
Source: https://www.money.co.uk/mortgages/should-you-get-a-fixed-tra...
Is the situation very different in the UK? Do Britishers actually prefer variable rate mortgages for some bizarre reason?
Edit: I did my own research and was shocked to find that in the UK it sounds like variable is indeed more or at least as common as fixed and that even fixed tends to be fixed only for the first 5-10 years!This is the opposite of the US, where I know someone on a normal middle class circumstance who just secured a 3.25% 30 year fixed mortgage, and this is extremely common right now if you have good credit. Even the "scary and risky" variable mortgages in America are things like a 5/1 ARM which is fixed for the first 5 years, which sound like they'd be relatively low risk for the UK!
I am baffled. Is the great advantage for the American homeowner simply due to the wages of empire, ie dollar supremacy? Federal policy favoring homeowners? Or what? I did always wonder how banks could afford to provide such a good deal.
This is a vast difference really worth wondering about; I hope someone has some insight.
Source: https://www.money.co.uk/mortgages/should-you-get-a-fixed-tra...
Fixes in the UK now are typically 2, 3, 5 or 10 years, certainly not life of mortgage. Idea is that prices increase and you repay the mortgage and you remortgage onto a better rate (so start with 90% 5 year fix, after 5 years you've paid down to 85% of the original value, but value has increased so you now remortgage onto 75% LTV which is a lower rate than you would have on 90% LTV as it's less risky.
Mortgage rates in the UK are far lower than 3.25% though -- 80% LTV on a 10 year fix with nationwide is 2.8%, 2 year fix is 1.54%.
Drop that to 60% LTV and 2 year is 1%, 5 year 1.1% and 10 year 2%.
It all falls down if rates were to shoot up, or house prices were to shoot down. The UK government traditionally protects house prices like the US government protects the S&P though. A house price crash is bad for polling.
Mortgage rates in the UK are far lower than 3.25% though -- 80% LTV on a 10 year fix with nationwide is 2.8%, 2 year fix is 1.54%.
Drop that to 60% LTV and 2 year is 1%, 5 year 1.1% and 10 year 2%.
It all falls down if rates were to shoot up, or house prices were to shoot down. The UK government traditionally protects house prices like the US government protects the S&P though. A house price crash is bad for polling.
> Usually mortgages are a fixed rate for the life of the loan (usually 30 years) -- at least here in the USA.
Note that the very low share of ARMs is a recent (post Great Recession) phenomenon. Prior to that, ARMs were typically a large minority of loans.
https://www.newyorkfed.org/medialibrary/media/research/curre...
Note that the very low share of ARMs is a recent (post Great Recession) phenomenon. Prior to that, ARMs were typically a large minority of loans.
https://www.newyorkfed.org/medialibrary/media/research/curre...
Ah, makes sense. Low rates, you want fixed. High rates, you want variable. I just don't understand how the bank puts up with it.
Most of the ARMs were sold with very little downward adjustability. With rates at historic highs, the ones I was seeing when mortgage shopping in 2006ish consistently had wide open upward adjustment and one 0.25% step available of downward adjustment to their minimim rate from the initial rate.
The bank wasn't taking much risk on the adjustable rate.
The bank wasn't taking much risk on the adjustable rate.
I mean the risk the banks take today offering a fixed 30 year note at a very low rate, if there is significant inflation or rate increases anytime soon. It seems like a very good deal for the buyer right now and for the last decade.
Uk banks offer a wide range of mortgages. Interest rates used to be set by the government rather than the Bank of England and were a political tool until the late 90s. That added to uncertainty and pushed people to fixed mortgages. Then the era of low interest rates arrived and people were locked in to high fixed rate mortgages which had a fee to get out of.
Now there are Australian type mortgages, basically repay as quick as you can, that are variable rate plus X. Or fixed and floating, or pure fixed. It generally depends on your personal position.
Now there are Australian type mortgages, basically repay as quick as you can, that are variable rate plus X. Or fixed and floating, or pure fixed. It generally depends on your personal position.
A lot of things in the UK are set up essentially with the notion that you shop around as much as you can to get the best deal, but it extends to credit cards, utility bills, internet, your mobile phone plan, etc. and not just one-off purchases.
You have little to no incentive to stick around as a long-term customer when there will be a fresh new deal enticing you to switch whenever your last contract expires. It's often more expensive not to switch as there's no benefit to being loyal to an energy or telecoms firm.
This arguably extends to mortgages too.
At the root of it all is that there's more competition between these elements and legislation has forced businesses to make it easy to switch providers at no cost. Anecdotally, I've been through three different ISPs in as many years in order to keep my internet costs down.
That doesn't directly address the question, it just highlights a mindset.
You have little to no incentive to stick around as a long-term customer when there will be a fresh new deal enticing you to switch whenever your last contract expires. It's often more expensive not to switch as there's no benefit to being loyal to an energy or telecoms firm.
This arguably extends to mortgages too.
At the root of it all is that there's more competition between these elements and legislation has forced businesses to make it easy to switch providers at no cost. Anecdotally, I've been through three different ISPs in as many years in order to keep my internet costs down.
That doesn't directly address the question, it just highlights a mindset.
>This horrifies me. Even the slightest increase in interest rates will ruin a huge number of home owners.
And the slightest increase in inflation will benefit them.
A competent central bank would make sure that it all balances out.
And the slightest increase in inflation will benefit them.
A competent central bank would make sure that it all balances out.
Having lived through the 70s and 80s, the last 30 years have been relatively stable by comparison. But different. Zero interest rates, ERM, and QE, versus inflation, stagflation, currency devaluation, decimalisation and the winter of discontent. I can wait to see what black swans we get in the next 20 or 30 years. My point being really, the classic finance phrase, past performance is no guarantee of future performance.
The real problem is how much the bank earns off the interest it charges you throughout your life while it had to do what?... create new money from nothing into the money supply with special permissions given to it by the government. This is why housing is so expensive to begin with. This bullshit needs to stop.
That's a concern after more pressing issues are solved.
Banks don’t get to create money. Quantitive Easing isn’t something banks can call up on demand and it isn’t banks getting loads of free money. Instead they sell certain slightly risky assets to the government at a slightly higher price than they would be worth without QE. This small price difference is the free money but the bigger difference is that the banks have more liquid cash to use for e.g. making loans.
I think mortgages are pretty competitive, especially for reasonably well-paid people and there isn’t really that much profit made by the banks (your interest corresponds to inflation and the risk that you default on your loan with the house price having fallen.
Money today is worth more than money in 25 years and you have to pay the difference.
I think mortgages are pretty competitive, especially for reasonably well-paid people and there isn’t really that much profit made by the banks (your interest corresponds to inflation and the risk that you default on your loan with the house price having fallen.
Money today is worth more than money in 25 years and you have to pay the difference.
> Banks don’t get to create money
Literally every loan a bank gives out is mostly made up on the spot, everywhere in the world.
In some countries, banks are subject to reserve requirements — typically from fractions of a percent to some percents of their liabilities to depositors. Basically: banks need to cover the savings of people.
In the UK (and many other countries), this is not the case; banks are not required to have cash on hand in relation to their liabilities to depositors.
Instead, they are subject to capital requirements, which means they need to have sufficient equities (cash, securities, other financial instruments) with sufficient liquidity in relation to their risk-weighted assets (credit and loans). In effect: banks need to cover the investments of the investors.
Literally every loan a bank gives out is mostly made up on the spot, everywhere in the world.
In some countries, banks are subject to reserve requirements — typically from fractions of a percent to some percents of their liabilities to depositors. Basically: banks need to cover the savings of people.
In the UK (and many other countries), this is not the case; banks are not required to have cash on hand in relation to their liabilities to depositors.
Instead, they are subject to capital requirements, which means they need to have sufficient equities (cash, securities, other financial instruments) with sufficient liquidity in relation to their risk-weighted assets (credit and loans). In effect: banks need to cover the investments of the investors.
The term for the type with reserve requirements is fractional-reserve banking: https://en.wikipedia.org/wiki/Fractional-reserve_banking
Commercial banks create money when lending money.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
"Banks don’t get to create money." nope, they create debt, which is the same in practice.
Well, if we want to use correctish terminology then banks grant credit (the number on your bank account) when debtors offer a promise to pay (the debt contract).
The bank is collect money in the future that is worth less than what they leant out today - time value of money.
Charging 0% interest means the bank is losing money.
Charging 0% interest means the bank is losing money.
I don't get how people can keep saying this. Is it that people are told banks lend out money from depositors in school?
Anyway, if you sign a contract that says you shall pay me every month for 30 years OR ELSE I get to sell your house (and whatever else you own, seize your income etc) then the document with your signature IS the value created and I can sell that document for what it is worth.
So the bank creates money not entirely out of thin air but against this contract.
This is a fantastic deal for them as there is almost no risk.
The seemingly few percent interest per year over 30 years quickly ads up to 2 or 3 times the initial sum.
I suppose this would be a reasonable amount roughly around the point where 3 out of 4 houses and the ground under them would just vanish in thin air with their owner stopping all payments after about 5 years on average.
The reality was that some people still had to pay rent for their flooded home.
So we are all suckers for putting up with the scheme, welcome to the club.
Anyway, if you sign a contract that says you shall pay me every month for 30 years OR ELSE I get to sell your house (and whatever else you own, seize your income etc) then the document with your signature IS the value created and I can sell that document for what it is worth.
So the bank creates money not entirely out of thin air but against this contract.
This is a fantastic deal for them as there is almost no risk.
The seemingly few percent interest per year over 30 years quickly ads up to 2 or 3 times the initial sum.
I suppose this would be a reasonable amount roughly around the point where 3 out of 4 houses and the ground under them would just vanish in thin air with their owner stopping all payments after about 5 years on average.
The reality was that some people still had to pay rent for their flooded home.
So we are all suckers for putting up with the scheme, welcome to the club.
>>Charging 0% interest means the bank is losing money.
> I don't get how people can keep saying this. Is it that people are told banks lend out money from depositors in school?
They don't? Where is the money from? Due to complicated reasons (ie. bundling mortgages into mortgage backed securities and selling them), it might not be the case that the mortgage issued by Bank A is funded by Bank A's depositors, but it is the case that it's funded by depositors/investors somewhere.
> I don't get how people can keep saying this. Is it that people are told banks lend out money from depositors in school?
They don't? Where is the money from? Due to complicated reasons (ie. bundling mortgages into mortgage backed securities and selling them), it might not be the case that the mortgage issued by Bank A is funded by Bank A's depositors, but it is the case that it's funded by depositors/investors somewhere.
From a technical perspective you need deposits but from a practical perspective deposits never leave the system except in the case of a bank run where everyone tries to withdraw their money. If we assume a cashless system then banks can never run out of deposits and deposits never limit loan creation. Saving doesn't increase the number of deposits, it just shifts them around. Borrowing money increases the number of deposits.
https://www.investopedia.com/articles/investing/022416/why-b...
However, saving does have one important function. It creates a hole in the economy and that hole can then be used for investment spending (motivated by a borrower taking on a loan) without causing inflation.
https://www.investopedia.com/articles/investing/022416/why-b...
However, saving does have one important function. It creates a hole in the economy and that hole can then be used for investment spending (motivated by a borrower taking on a loan) without causing inflation.
>If we assume a cashless system then banks can never run out of deposits and deposits never limit loan creation
...except for reserve/capital requirements, right?
>However, saving does have one important function. It creates a hole in the economy and that hole can then be used for investment spending (motivated by a borrower taking on a loan) without causing inflation.
In other words, capital isn't free as the parent poster suggests.
...except for reserve/capital requirements, right?
>However, saving does have one important function. It creates a hole in the economy and that hole can then be used for investment spending (motivated by a borrower taking on a loan) without causing inflation.
In other words, capital isn't free as the parent poster suggests.
> Where is the money from?
It is created ex nihilo, limited by reserve concerns (which include hard requirements for some banks)
Note that the most of the money never exists in the form of currency, it is just accounting entries in the banking system.
It is created ex nihilo, limited by reserve concerns (which include hard requirements for some banks)
Note that the most of the money never exists in the form of currency, it is just accounting entries in the banking system.
> Where is the money from?
https://youtu.be/b6_SLwReMqo
https://youtu.be/b6_SLwReMqo
The system makes some sense because your fiat isn't completely worthless paper as many people think but there is something missing. It's that promises inherently have a tendency to lapse so we artificially introduce inflation. Well, the problem with inflation is that it requires you to borrow more money so you replace the lapsed promise with an empty promise that is bound to lapse as well. If we were truly serious about letting promises lapse then we would consider having negative interest rates rather than inflation.
Rather than have 0% interest and 2% inflation there would be -2% interest and 0% inflation. Less need for endless debt growth and government stimulus.
Rather than have 0% interest and 2% inflation there would be -2% interest and 0% inflation. Less need for endless debt growth and government stimulus.
It's not a lot to be fair, and interest rates are below inflation.
I've wondered lately, since the government backstops both banks and mortgages, shouldn't it just cut out the middleman? It could either give cheaper mortgages or use the difference as tax revenue.
There's this weird brain worm from the 1980s in a lot of western democracies where everything government does has to be bid out to companies and driven by profit motive under the theory that it produces better outcomes. It doesn't seem to be working after decades of this experiment, but people keep trying.
Well, I personally think that the banks profit margins are way too high but let me explain why they deserve to charge a profit in the first place.
We can make promises to each other. Essentially write debt contracts to each other at no fee. The problem is that we trust each other but if we want a more complex economy than a barter system allows, then we need to make it possible for a third party to trust the debt contract. Through the introduction of banks as middlemen they use their resources to check how trustworthy the debt contract you offer to the bank is. In exchange you get money, which is a liquid claim on your debt contract and thousands or even millions of other debt contracts. Thus the bank is primarily in the business of managing risk and the management of risk demands a net interest margin. If the bank didn't make money off of loans then any bad loan would lose the bank money and it would go bankrupt over the long term. In other words, the surplus profit that the bank made off your loan is its reward for correctly managing risk.
>This is why housing is so expensive to begin with.
Or it could be that housing is in high demand and banks offer financing so people have more money but since location is a monopoly, supply never catches up with demand in popular areas. Speculators themselves simply predict that there is sufficient demand for you to be willing to bay $400k for a house. Speculators didn't create that profit margin, it is the monopoly of land that created it and they merely exploit it.
We can make promises to each other. Essentially write debt contracts to each other at no fee. The problem is that we trust each other but if we want a more complex economy than a barter system allows, then we need to make it possible for a third party to trust the debt contract. Through the introduction of banks as middlemen they use their resources to check how trustworthy the debt contract you offer to the bank is. In exchange you get money, which is a liquid claim on your debt contract and thousands or even millions of other debt contracts. Thus the bank is primarily in the business of managing risk and the management of risk demands a net interest margin. If the bank didn't make money off of loans then any bad loan would lose the bank money and it would go bankrupt over the long term. In other words, the surplus profit that the bank made off your loan is its reward for correctly managing risk.
>This is why housing is so expensive to begin with.
Or it could be that housing is in high demand and banks offer financing so people have more money but since location is a monopoly, supply never catches up with demand in popular areas. Speculators themselves simply predict that there is sufficient demand for you to be willing to bay $400k for a house. Speculators didn't create that profit margin, it is the monopoly of land that created it and they merely exploit it.
Note, this targets anyone buying houses to rent out. It does not (like london considered) tax un-lived-in houses.
This is just a weird bandaid. Mostly trying to blame landlords for this housing crisis when mortgage tax credits, and scarcity due to weird eco regulation shenanigans are to blame.
This is just a weird bandaid. Mostly trying to blame landlords for this housing crisis when mortgage tax credits, and scarcity due to weird eco regulation shenanigans are to blame.
There aren't mortgage tax credits in the UK, and I have no idea what you mean by "eco regulation shenanigans"
They are both Dutch situations.
The eco regulation shenanigans is about nitrogen emissions. They are limited by European regulations near protected areas. The government ignored and worked around these regulations for a long time. Then environmental parties sued, and we were so far above the limits it was essentially ruled "no more emissions". Whilst building new houses causes a decent amount of emissions. This meant that country wide, getting building permits became almost impossible.
This contributed partially to our current housing shortage.
The eco regulation shenanigans is about nitrogen emissions. They are limited by European regulations near protected areas. The government ignored and worked around these regulations for a long time. Then environmental parties sued, and we were so far above the limits it was essentially ruled "no more emissions". Whilst building new houses causes a decent amount of emissions. This meant that country wide, getting building permits became almost impossible.
This contributed partially to our current housing shortage.
The massive shortage existed way before that lawsuit was even in the making.
Has it ever been possible to buy a house on minimum wage?
I moved here years ago and was having doubts if it's the right time to buy at these insane property prices. A coworker said "I know some people who've been holding out for fair housing prices since 1949, they are still waiting".
Anyone remember Fair Rent tribunals in the UK? Abolished by the Conservatives in the late 80s along with higher education grants. The 70s and early 80s were a golden age for more than just music.
Not sure about minimum wage. But certainly for regular blue collar labour it was. And I don't see why it should not have been.
Yes, depending on where you buy. Many homes are much cheaper outside of major cities.
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That’d have to be a £60k house.
They do exist. If you can work remotely or don't mind the commute to Cardiff - welcome to Merthyr!
https://www.rightmove.co.uk/house-prices/detailMatching.html...
https://www.rightmove.co.uk/house-prices/detailMatching.html...
Not a very popular view among the Valleys LAs though who aspire to be something other than dormitories for Cardiff
40 years ago some family homes in NL cost 35 k guilders or 16 k euro. 2 floors, 2 bedrooms, front and back yard.
UK’s also only had a min wage since Blair
Yes. I even knew welfare recepients who bought a property while on welfare.
Pepperidge farms remembers.
Pepperidge farms remembers.
Vacant properties in London are a red herring. Last time I checked official number they accounted for 1% of the housing stock, bearing in mind that a number of properties are always being refurbished at any given time. In general it does not make sense to keep a property empty unless perhaps it is an extreme luxury one.
South Kensington is one of the most expensive area of London and not representative at all. Whatever happens there does not affect the average person, and quite of few of the grand houses there are also actually offices.
In any case, it is not true that 30% of homes are empty there. Apparently the City of London (i.e. the square mile, not London as a whole) has the highest rate in the country and that is still only about 4% [1].
In Cornwall the issue is quite different: The area is very attractive for second homes and, at the same time, it is the second poorest region in all of Northern Europe. This means that local resident have a very low purchasing power and indeed cannot compete with people from London and the South East. I think that they are starting to implement restrictions in some areas in order to give priorities to buyers who will occupy the property as their main residence in order to keep second homes in check.
[1] https://www.cityam.com/15bn-worth-of-london-homes-sit-empty-...
South Kensington is one of the most expensive area of London and not representative at all. Whatever happens there does not affect the average person, and quite of few of the grand houses there are also actually offices.
In any case, it is not true that 30% of homes are empty there. Apparently the City of London (i.e. the square mile, not London as a whole) has the highest rate in the country and that is still only about 4% [1].
In Cornwall the issue is quite different: The area is very attractive for second homes and, at the same time, it is the second poorest region in all of Northern Europe. This means that local resident have a very low purchasing power and indeed cannot compete with people from London and the South East. I think that they are starting to implement restrictions in some areas in order to give priorities to buyers who will occupy the property as their main residence in order to keep second homes in check.
[1] https://www.cityam.com/15bn-worth-of-london-homes-sit-empty-...
The median price for a property in London is £600K, the average is over £1M today.
That means that normal people cannot afford to buy anything in London even with HTB which is a terrible policy the people who can afford to use it are already in the top percentiles.
A £600K property as a first time buyer requires you to have about £100K to get on a property ladder.
10% deposit for a 90% LTV mortgage is £60K, stamp duty is £17,500 (£20K from end of Sep 21) that’s already ~£80,000 then you have mortgage fees, legal fees, furnishing costs (since new builds don’t even come with blinds)…
The average salary in London is £41K, that leaves you with take home pay of about £30K after tax (if you have no student loans).
So a house hold of two people living in London has about £60K per year if both earn the average pay, £25K or more of which would go to rent per year, another £4000 will go to various utility bills and council tax, another 5-5.5K would go for travel (assuming you live within zone 1-4), then you have food, clothing and other living expenses, so if you are somehow lucky and can save up £10K per year that’s 10 years to save up enough for a median property which is most likely a 54 sq/m flat.
Add kids to this mix and well you are royally fucked.
That means that normal people cannot afford to buy anything in London even with HTB which is a terrible policy the people who can afford to use it are already in the top percentiles.
A £600K property as a first time buyer requires you to have about £100K to get on a property ladder.
10% deposit for a 90% LTV mortgage is £60K, stamp duty is £17,500 (£20K from end of Sep 21) that’s already ~£80,000 then you have mortgage fees, legal fees, furnishing costs (since new builds don’t even come with blinds)…
The average salary in London is £41K, that leaves you with take home pay of about £30K after tax (if you have no student loans).
So a house hold of two people living in London has about £60K per year if both earn the average pay, £25K or more of which would go to rent per year, another £4000 will go to various utility bills and council tax, another 5-5.5K would go for travel (assuming you live within zone 1-4), then you have food, clothing and other living expenses, so if you are somehow lucky and can save up £10K per year that’s 10 years to save up enough for a median property which is most likely a 54 sq/m flat.
Add kids to this mix and well you are royally fucked.
Why is it reasonable to assume that people earning an average wage should be able to afford a home in the most desirable city in the UK, and one of the most desirable cities in Europe if not the world?
I mean, nobody complains in the US if the average family can’t buy a home in Manhattan. That’s just unreasonable.
I mean, nobody complains in the US if the average family can’t buy a home in Manhattan. That’s just unreasonable.
The idea is that two people on an average London wage should be able to afford to live in an average home in London. The truth is they can - if they can get the deposit together (which is trivial if you have parents you can live with for a couple of years, but if you've moved to London for work and your family lives 300 miles away your deposit savings go on rent). Perhaps they can't live in the most desirable parts of Chelsea, but there are affordable houses in the London area for a couple of 41k each.
Personally if I had to work in London, I'd look at buying a 2 bed house somewhere like Leighton Buzzard (30m Euston), Gravesend (22m St Pancras), Tonbridge (35m London Bridge), for about 250k.
Personally if I had to work in London, I'd look at buying a 2 bed house somewhere like Leighton Buzzard (30m Euston), Gravesend (22m St Pancras), Tonbridge (35m London Bridge), for about 250k.
> earning an average wage
Average wage in London, not average overall.
Average wage in London, not average overall.
"Why is it reasonable to assume that people earning an average wage should be able to afford a home"
Whats's next, "why should an average person be able to afford an education or healthcare"?
Whats's next, "why should an average person be able to afford an education or healthcare"?
> even with HTB which is a terrible policy the people who can afford to buy are already in the top percentiles
What a load of rubbish. HTB really helped us when buying by giving 5 years of interest free
We bought a 240k house with a 12k deposit and 48k htb. Moving costs etc meant we had to find about £17k, which we borrowed.
Assuming you do that now, HTB means paying £647 a month on the mortgage and £330 a month on repaying the deposit. Total of £977pcm.
After 5 years we sold for 240k with £48k htb and £160k mortgage, leaving us with 32k in equity. We could have remortgaged and repaid the htb at that point for a total outlay of £911pcm (with about £500 in fees)
With two earners on a middle 28k a year that's falls into well into the "affordable" bucket.
Even in London, a 600k house with htb will mean a £30k deposit (a problem) and a £330k mortgage. Two people on 41k each can borrow up to £368k with nationwide which gives an idea about affordability (you'll have to knock some off for things like service charges which are ubiquitious in new houses)
And 41k a year with a coalition loan means you have £30,310.51 per year after student loan, not before. If you still have a labour loan from pre-2012 you'll be paying an extra £600 a year.
All that's assuming a 600k loan. Reality is that help to buy homes aren't that expensive. This is a decent sized 2 bed flat for £375k.
https://www.helptobuyagent2.org.uk//property-search/property...
Personally I think you'd be crazy to live in London when there are far more reasonable places to live just half an hour out of a one 1 station and far far less cost, but it London is affordable for people with two London incomes.
If you're single on minimum wage and wanting to live in central London? Well tough. Move somewhere else. Plenty of choice for houses in Crewe and Stoke, and plenty of minimum wage jobs.
What a load of rubbish. HTB really helped us when buying by giving 5 years of interest free
We bought a 240k house with a 12k deposit and 48k htb. Moving costs etc meant we had to find about £17k, which we borrowed.
Assuming you do that now, HTB means paying £647 a month on the mortgage and £330 a month on repaying the deposit. Total of £977pcm.
After 5 years we sold for 240k with £48k htb and £160k mortgage, leaving us with 32k in equity. We could have remortgaged and repaid the htb at that point for a total outlay of £911pcm (with about £500 in fees)
With two earners on a middle 28k a year that's falls into well into the "affordable" bucket.
Even in London, a 600k house with htb will mean a £30k deposit (a problem) and a £330k mortgage. Two people on 41k each can borrow up to £368k with nationwide which gives an idea about affordability (you'll have to knock some off for things like service charges which are ubiquitious in new houses)
And 41k a year with a coalition loan means you have £30,310.51 per year after student loan, not before. If you still have a labour loan from pre-2012 you'll be paying an extra £600 a year.
All that's assuming a 600k loan. Reality is that help to buy homes aren't that expensive. This is a decent sized 2 bed flat for £375k.
https://www.helptobuyagent2.org.uk//property-search/property...
Personally I think you'd be crazy to live in London when there are far more reasonable places to live just half an hour out of a one 1 station and far far less cost, but it London is affordable for people with two London incomes.
If you're single on minimum wage and wanting to live in central London? Well tough. Move somewhere else. Plenty of choice for houses in Crewe and Stoke, and plenty of minimum wage jobs.
HTB is a disastrous policy that did nothing but to increase the prices of properties.
People could borrow much more than they could because the government covered 40% in London and 20% outside of it.
Look at the new developments in London, the price is well just under the HTB limit for the handful of HTB flats, then there is the shared ownership racket too.
And commuting towns aren’t that cheaper either, and that is even before you account for the insane costs of rail passes.
People could borrow much more than they could because the government covered 40% in London and 20% outside of it.
Look at the new developments in London, the price is well just under the HTB limit for the handful of HTB flats, then there is the shared ownership racket too.
And commuting towns aren’t that cheaper either, and that is even before you account for the insane costs of rail passes.
> HTB is a disastrous policy that did nothing but to increase the prices of properties.
It let me buy a property which I wouldn't be able to without HTB, therefore your statement is objectively wrong.
> And commuting towns aren’t that cheaper either
Plenty of 2 bed houses in daily commuting distance for £250k - easily affordable on a London wage.
It let me buy a property which I wouldn't be able to without HTB, therefore your statement is objectively wrong.
> And commuting towns aren’t that cheaper either
Plenty of 2 bed houses in daily commuting distance for £250k - easily affordable on a London wage.
HTB has definitely increased the prices of HTB eligible properties because they realised that buyers could afford a bit more w/ Gov assistance and so sellers are squeezing people for it.
Really, HTB should not have had a restriction on new builds. It's laughable because the restriction would make sense if the Gov was allowing anyone to actually build new properties.
I think you're FYIGM'ing. Idk where you're finding these decent 2 bed "houses" (I think you mean flats) in London for "250k". Hell even a 2 bed flat is mostly around the 350-400k mark in most of London, unless you want to raise your family in Croydon or something lol
Really, HTB should not have had a restriction on new builds. It's laughable because the restriction would make sense if the Gov was allowing anyone to actually build new properties.
I think you're FYIGM'ing. Idk where you're finding these decent 2 bed "houses" (I think you mean flats) in London for "250k". Hell even a 2 bed flat is mostly around the 350-400k mark in most of London, unless you want to raise your family in Croydon or something lol
It’s not that buyers could afford a bit more, buyers could afford essentially to pay double in London.
This isn’t because of the deposit but because HTB essentially allows you to buy a property for double the price in London.
Most people couldn’t afford a 500K property not because they can’t save up £50K but because they won’t have a salary north of £100K for the bank to loan them the rest as lenders cap the loan amount at 4-4.5 times your annual salary.
So now people that earn £50K can buy a property that only people that earn £100-120K could regardless of their deposits.
This isn’t because of the deposit but because HTB essentially allows you to buy a property for double the price in London.
Most people couldn’t afford a 500K property not because they can’t save up £50K but because they won’t have a salary north of £100K for the bank to loan them the rest as lenders cap the loan amount at 4-4.5 times your annual salary.
So now people that earn £50K can buy a property that only people that earn £100-120K could regardless of their deposits.
> It let me buy a property which I wouldn't be able to without HTB
Possibly you're taking the wrong counterfactual here?
"If I hadn't HTB but everyone else did" vs "If no-one had HTB".
It's possible you're quite right about the first, but it tells us little about the second. Possibly in the presence of HTB, prices just rise again until they reach their equilibrium of just-barely-affordable.
Possibly you're taking the wrong counterfactual here?
"If I hadn't HTB but everyone else did" vs "If no-one had HTB".
It's possible you're quite right about the first, but it tells us little about the second. Possibly in the presence of HTB, prices just rise again until they reach their equilibrium of just-barely-affordable.
House price doesn't matter, it's the deposit. HTB may have pushed up the house price by say 30%, but it meant the deposit was lower (12k rather than 18k) and the repayments were lower for the first 5 years.
House price does matter. End of the day with the bump-ed up H2B house prices...sure you can afford it w/ lower deposit thanks to gov assistance...but it's not free money. You still have to pay it back, so the seller is making an extra 30% of our backs bc they bumped the prices thanks to this scheme that was meant to "help" people.
People don’t pay them back no one can pay back 40% after 5 years assuming they bought in London.
If they do pay it back they do it by remortgaging so the builders win, the banks win, the tax payer pays for any HTB loans that aren’t repaid and the tax payer gets shafted with higher housing costs.
If they do pay it back they do it by remortgaging so the builders win, the banks win, the tax payer pays for any HTB loans that aren’t repaid and the tax payer gets shafted with higher housing costs.
The deposit doesn’t matter, what matters is the total loan amount.
For a £500K flat you need a £50K deposit but you also need a household income of £100K or more to be able to borrow £450K as banks cap the maximum amount they’ll loans at 4-4.5 of your annual income.
So HTB didn’t only increase the prices it also pushed people to take on loans that they normally would not be able to afford.
For a £500K flat you need a £50K deposit but you also need a household income of £100K or more to be able to borrow £450K as banks cap the maximum amount they’ll loans at 4-4.5 of your annual income.
So HTB didn’t only increase the prices it also pushed people to take on loans that they normally would not be able to afford.
For 250K you’ll find shitty property that would require a 2-3 hours of daily commute that will cost around £5000 annually per person working in London…
The problem with HTB is that it sustains inflation. Essentially it subsidises continued property prices' growth, which, in my view, is rather nonsensical economically.
As for saving for a deposit, I think an issue is also that many people seem not to have been educated about the benefits of saving at all. Bluntly, many young people I see find the money for short term consumption and don't save anything.
As for saving for a deposit, I think an issue is also that many people seem not to have been educated about the benefits of saving at all. Bluntly, many young people I see find the money for short term consumption and don't save anything.
When I was young my outgoings were mainly the cheapest rent I could find. And maybe a slice of avocado toast once a week /s
This is because rents rise to the amount someone is willing to pay, which is basically what they earn, because they have to live somewhere near work. If they get free board then they can swiftly build up savings and buy a house and continue the cycle of wealth. If they have to pay, they're screwed.
This is because rents rise to the amount someone is willing to pay, which is basically what they earn, because they have to live somewhere near work. If they get free board then they can swiftly build up savings and buy a house and continue the cycle of wealth. If they have to pay, they're screwed.
> you'd be crazy to live in London when there are far more reasonable places to live just half an hour out of a one 1 station and far far less cost
How much cheaper would it be? I've just moved to London (living in zone 2, going a bit further didn't strike me as much cheaper).
How much cheaper would it be? I've just moved to London (living in zone 2, going a bit further didn't strike me as much cheaper).
Depends how often you need to be in London,
2 bed terrace, £270k https://www.rightmove.co.uk/properties/111488087
40 minutes to Fenchurch Street (little less for Docklands), £65 per week//£2600 per year.
2 bed 230k https://www.rightmove.co.uk/properties/112846073
22 minutes to St Pancras, £127 per week//5k per year
If you can get a 2 bed house that close to central London at those prices that's great.
2 bed terrace, £270k https://www.rightmove.co.uk/properties/111488087
40 minutes to Fenchurch Street (little less for Docklands), £65 per week//£2600 per year.
2 bed 230k https://www.rightmove.co.uk/properties/112846073
22 minutes to St Pancras, £127 per week//5k per year
If you can get a 2 bed house that close to central London at those prices that's great.
Only issue with those is the c2c and great western thameslink etc for a season ticket (to get into London for work) you're paying (for that first property in Grays): £3,872.00 per year (includes tube travel) since domestic rail prices here are just ridiculous (lowest subsidies per passenger mile in all of Europe)
Also, presuming you don't work at Fenchurch Street, the commute would be anywhere from an hour (to Fenchurch street) to an hour fifteen minutes (nearbyish tube stations).
Also, presuming you don't work at Fenchurch Street, the commute would be anywhere from an hour (to Fenchurch street) to an hour fifteen minutes (nearbyish tube stations).
That is a complex problem, though. The main issue is land investment that effectively prevents or greatly limits potential new construction. With new construction thwarted even modest growth over time causes extreme prices per unit.
Preventing properties from being treated as bidding chips or bonds issued this could greatly improve the situation, but without addressing land use and land banking then the lack of new construction will continue to unbalance property markets.
Preventing properties from being treated as bidding chips or bonds issued this could greatly improve the situation, but without addressing land use and land banking then the lack of new construction will continue to unbalance property markets.
South Kensington is also home to Imperial College London. See this map to get a feel for the extent of it in the area: https://www.imperial.ac.uk/media/imperial-college/visit/publ...
You did explicitly say houses but possibly the area is quieter and less inhabited out of term time.
You did explicitly say houses but possibly the area is quieter and less inhabited out of term time.
Similar situation for York -- tourist hotspot, a large chunk of the local jobs in tourism/customer service, retail, food service etc.
Article in the local press in the last year (which I obviously can't find now) found that something like 95% of the properties on sale were unaffordable on the median wage of a local resident.
And then you get articles like this one: https://yorkmix.com/york-is-the-norths-property-hotspot-as-i... Funny thing is, this article happens to be a total submarine -- I recognise the development they're describing, it's been there for years and has not sold well (totally overpriced) -- this article and others like it are just an attempt to drum up further demand.
Really frustrating that when we have so many people needing housing, homes are built entirely with the objective of selling them to people who already have homes elsewhere!
First houses should have priority over second houses please.
And then you get articles like this one: https://yorkmix.com/york-is-the-norths-property-hotspot-as-i... Funny thing is, this article happens to be a total submarine -- I recognise the development they're describing, it's been there for years and has not sold well (totally overpriced) -- this article and others like it are just an attempt to drum up further demand.
Really frustrating that when we have so many people needing housing, homes are built entirely with the objective of selling them to people who already have homes elsewhere!
First houses should have priority over second houses please.
Those empty homes should be torn down or squatted in. I imagine an organisation like a squatters union could be set up to manage protection for them.
Sure. Let's fix a housing crisis by completely breaking up laws, society and order.
Let’s fix a housing crisis by having houses be used.
I doubt this is the magical unique problem everyone claims it is, but “oh no think of people’s investment” when people are sleeping outside is valuing property over people.
I doubt this is the magical unique problem everyone claims it is, but “oh no think of people’s investment” when people are sleeping outside is valuing property over people.
Housing vacancy is essentially a red herring when it comes to the housing crisis. Vacancy rates are still low overall, and reducing vacant housing would barely make a dent in the issue. The real issue is that there isn't enough supply for a given level of demand (i.e. how many people there are who do or would like to live there). Cities have added way more people than they've added housing units over the past several decades.
So would you say the same applies for property which is being underutilized? Throw out the rich people living in 5 bedroom houses? Throw out the grandmas living in the house they once had a family and children in? Mandate minimum number of persons per square foot?
Hmm, I’m fairly certain we have some laws giving squatters rights if they live in some housing long enough without opposition.
It's not uncommon for cities to pas laws that aim at the reduction of unoccupied spaces amid housing crisis. Actually, most European capitals do this either by raising taxes on empty housing or by partially legalizing squatting.
Londongrad is an exception to what is otherwise a rule.
Londongrad is an exception to what is otherwise a rule.
Houses that are vacant for a long period attract higher council tax in London and the whole of England.
Of course you may argue that the difference is small in relation to multi-million pounds properties, but that is a more general issue with the council tax's range.
Of course you may argue that the difference is small in relation to multi-million pounds properties, but that is a more general issue with the council tax's range.
America fixed it's British Colony issue by doing just that.
I'm not sure society is going to break down if a few empty rich investor properties actually get used.
squatting is a "solution" to empty houses. Its not a good solution but it certainly draws attention to the issue.
Wages have been stagnant for decades while the cost of living has increased... and now housing has become a privilege.
Yes, there are "rich foreigners" and some corporations are strategically acquiring the places and spaces where high rent can be extracted. But what has driven housing cost in the market of individual homes is simply that some citizens can afford to borrow at low rates, and other citizens are seizing the opportunity to realise gains that they could not attain through a lifetime of work, wage increases, and other investing.
It is grim to work for years and have nothing else to show for it.
Young families, workers, the elderly, and the poor will be unable to afford even tenancy in the big cities. (To turn dark for just a moment, we only really seem to have a plan for the elderly.) The future control of crucial urban voting-blocks in Western democracies will be in the hands of landlords.
Yes, there are "rich foreigners" and some corporations are strategically acquiring the places and spaces where high rent can be extracted. But what has driven housing cost in the market of individual homes is simply that some citizens can afford to borrow at low rates, and other citizens are seizing the opportunity to realise gains that they could not attain through a lifetime of work, wage increases, and other investing.
It is grim to work for years and have nothing else to show for it.
Young families, workers, the elderly, and the poor will be unable to afford even tenancy in the big cities. (To turn dark for just a moment, we only really seem to have a plan for the elderly.) The future control of crucial urban voting-blocks in Western democracies will be in the hands of landlords.
The governments are to blame. If conventional mortgages were capped to 1 per person. And a minimum of 80% ltv was required. Then houses would be cheaper.
Instead the government is letting people put low money down, low interest rates, and buy up many houses at once. That of course inflated housing costs.
Instead the government is letting people put low money down, low interest rates, and buy up many houses at once. That of course inflated housing costs.
Yup, things like buy 2 let should've been banned in London & areas around London a long time ago. Hell, ban b2l in all of the UK until everyone that wants their first home has one.
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I like this idea. I’d add in though you gotta do something about corporate ownership though.
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> The governments are to blame.
Governments are reluctant to oppose profiteering. And with stagnant wages and rising COL, working people are being squeezed out of ownership.
The British band XTC had a prescient song -- "Where did the ordinary people go?" They couldn't afford to live in their hometowns anymore!
Governments are reluctant to oppose profiteering. And with stagnant wages and rising COL, working people are being squeezed out of ownership.
The British band XTC had a prescient song -- "Where did the ordinary people go?" They couldn't afford to live in their hometowns anymore!
This is desperately needed. And not just in the major cities; this is happening in every Dutch town. Amsterdam may have prices beyond absurd, but the whole nation is burdened by this problem.
In the street I live in the capital of the northern province of Fryslân (Frisia) most homes are owned by their inhabitants, but in the past few years we've seen several houses being bought by small-time investors (who already own their own home of course, are financially well on their way, and are looking for ways to save their saving from low interest rates and inflation), who charge renters four times what my fellow homeowners and I pay for mortgage.
You never get to know the renters, because they are really only here for as long as nothing better comes along (like buying a house or social housing), and who can blame them?
Meanwhile maintenance of these houses is minimal, because the market won't really reward proper upkeep at this point; they can always sell the house for an insane price tomorrow.
It's really upsetting to see my younger colleagues stuck renting a flat, while I own my house having even paid of the vast majority of the mortgage simply because I had the luck of buying it in 2013 (a major dip in the market where paying less than the listed price was common).
For the good of society we need to put a stop to this type of speculation on the housing market.
In the street I live in the capital of the northern province of Fryslân (Frisia) most homes are owned by their inhabitants, but in the past few years we've seen several houses being bought by small-time investors (who already own their own home of course, are financially well on their way, and are looking for ways to save their saving from low interest rates and inflation), who charge renters four times what my fellow homeowners and I pay for mortgage.
You never get to know the renters, because they are really only here for as long as nothing better comes along (like buying a house or social housing), and who can blame them?
Meanwhile maintenance of these houses is minimal, because the market won't really reward proper upkeep at this point; they can always sell the house for an insane price tomorrow.
It's really upsetting to see my younger colleagues stuck renting a flat, while I own my house having even paid of the vast majority of the mortgage simply because I had the luck of buying it in 2013 (a major dip in the market where paying less than the listed price was common).
For the good of society we need to put a stop to this type of speculation on the housing market.
When I was living in NL I knew a guy who had a mortgage for a house in Australia, a mortgage on a house in Groningen and then he was looking to get another mortgage for a house in Den Haag.
Banks don't seem to cooperate internationally or even nationally; he never told the banks he has mortgages already.
You’re right, banks don’t cooperate internationally in this area, but it cuts both ways no?
How can one get a mortgage in Holland without being a resident/having income declared there? The bank will not loan a foreign resident in those circumstances. Did he pay taxes in all those countries?
How can one get a mortgage in Holland without being a resident/having income declared there? The bank will not loan a foreign resident in those circumstances. Did he pay taxes in all those countries?
He is a Dutch resident but no bank knows he has other mortgages. He is not even allowed to rent out his house yet he does.
While banks may not check this on signing, they'll certainly check it when you start defaulting.
This really is the worst advice ever. It's a sure way to get you in Real Trouble when shit hits fans. This is not legal advice either, btw. Just someone who read the tiny letters in the mortgage contracts.
This really is the worst advice ever. It's a sure way to get you in Real Trouble when shit hits fans. This is not legal advice either, btw. Just someone who read the tiny letters in the mortgage contracts.
If he defaults. From his point a view he is not risking too much; he never put his own money as down payment it was 100÷ mortgage which NL is too generous with. Then the rent he earns is higher than the mortgage due to the low interest. So best case he ends up with 3 houses in 25 years. Worst case he gets some angry letters from the bank and loses houses that arent really his.
I am not condoning his actions but they are not irrational.
But he lied on his mortgage application about loans in other countries. So he could be up for some fraud criminal charges, and jail time.
I find that extremely unlikely
We had to reveal all of our houses and loans on our mortgage application. They had no way to verify, but the penalty in that case is always fraud. But there are definitely a lot of people out there who don’t think that is a serious problem, and the government has to come down hard on it:
https://www.magnifymoney.com/blog/mortgage/lying-mortgage-ap...
Is the UK more tolerant of lying than the USA? It doesn’t seem so via a Google search:
https://www.onlinemortgageadvisor.co.uk/mortgage-application...
Now, of course, they might not find out, but that just means it is a perfect crime, it is still a crime.
https://www.magnifymoney.com/blog/mortgage/lying-mortgage-ap...
Is the UK more tolerant of lying than the USA? It doesn’t seem so via a Google search:
https://www.onlinemortgageadvisor.co.uk/mortgage-application...
Now, of course, they might not find out, but that just means it is a perfect crime, it is still a crime.
Banks will definitely know about any other mortgages and loans you have within the Netherlands before the mortgage is finalized. These are all registered with the credit agency they all employ. The only exception to this rule (for now) is a government student loan.
I hope you're right! No one knew or did anything about him renting out the Groningen house thats for sure. I don't know what happened with the 3rd house plan of his, hopefully it didnt materialize.
[deleted]
> In the street I live in the capital of the northern province of Fryslân (Frisia) most homes are owned by their inhabitants, but in the past few years we've seen several houses being bought by small-time investors (who already own their own home of course, are financially well on their way, and are looking for ways to save their saving from low interest rates and inflation), who charge renters four times what my fellow homeowners and I pay for mortgage.
specifically the last part:
> small-time investors who charge renters four times what my fellow homeowners and I pay for mortgage
But what about maintenance costs though? Those costs are very high, definitely 4x the cost of the mortgage! /s
specifically the last part:
> small-time investors who charge renters four times what my fellow homeowners and I pay for mortgage
But what about maintenance costs though? Those costs are very high, definitely 4x the cost of the mortgage! /s
In the long term, the ethically right answer seems pretty clearly to me to be a land value tax [0]. But due to encouragement of home ownership [1], that's not going to democratically tenable in a lot of countries for 20+ years. Unfortunate situation.
[0] In 1879, a man asked "How come all this new economic development and industrialized technology hasn't eliminated poverty and oppression?" That man was Henry George, his answer came in the form of a book called Progress & Poverty, and this is a review of that book - https://astralcodexten.substack.com/p/your-book-review-progr...
[1] https://www.economist.com/leaders/2020/01/16/home-ownership-...
[0] In 1879, a man asked "How come all this new economic development and industrialized technology hasn't eliminated poverty and oppression?" That man was Henry George, his answer came in the form of a book called Progress & Poverty, and this is a review of that book - https://astralcodexten.substack.com/p/your-book-review-progr...
[1] https://www.economist.com/leaders/2020/01/16/home-ownership-...
I'm not sold on the Economist article. I do believe in home ownership. The idea that a person spends a lifetime in the same home and community is a good one. We're tribal creatures, and you want a tribe -- you want people to know their neighbors, have community BBQs, and live in real communities. You want enough of a vested interest in municipal politics that democratic structures work. You want kids growing up with the same friends in school.
The flips side can be pretty dark too. For example, there are are plenty of stories of poorer communities, especially African American tenant ones, being broken up and priced out by gentrification of rental markets.
Ownership is less economically efficient, but much more resilient. Once a mortgage is paid off, you've always got a roof overhead. You just need to earn enough for food, clothing, and medicine.
I think the trick would be to implement significant differences in land tax based on:
* a home you live in; versus
* an individual investment property (e.g. if you own 2-3 homes); versus
* an institutional investment property (e.g. investment fund owns hundreds of homes)
The flips side can be pretty dark too. For example, there are are plenty of stories of poorer communities, especially African American tenant ones, being broken up and priced out by gentrification of rental markets.
Ownership is less economically efficient, but much more resilient. Once a mortgage is paid off, you've always got a roof overhead. You just need to earn enough for food, clothing, and medicine.
I think the trick would be to implement significant differences in land tax based on:
* a home you live in; versus
* an individual investment property (e.g. if you own 2-3 homes); versus
* an institutional investment property (e.g. investment fund owns hundreds of homes)
I don’t think the article is saying ownership is a bad thing in itself, but that the vast resources that have been poured into promoting and subsidising it have had some pretty undesirable consequences.
Here in the UK we have started imposing tax penalties on buy to rent that disincentivizes owning more than one or two rental properties. The problem with punishing institutional investors is it would take huge amounts on investment out of the housing market, just as we have a massive need for more housing. We need more houses for people to buy and more new housing available to rent. Rental properties by themselves aren’t a problem, it’s taking houses out of individual ownership and transferring them to the rental sector that’s the problem.
Here in the UK we have started imposing tax penalties on buy to rent that disincentivizes owning more than one or two rental properties. The problem with punishing institutional investors is it would take huge amounts on investment out of the housing market, just as we have a massive need for more housing. We need more houses for people to buy and more new housing available to rent. Rental properties by themselves aren’t a problem, it’s taking houses out of individual ownership and transferring them to the rental sector that’s the problem.
Home prices are up because there is no supply. There's no supply because people can't afford to build houses. The issue isn't home ownership, it's the lack of it.
An LVT might work but I think it is only ethical if you advantage primary residences with a complete lack of tax.
An LVT might work but I think it is only ethical if you advantage primary residences with a complete lack of tax.
It can’t simultaneously be true that people are paying huge sums fir houses, driving prices up, and they can’t afford to build new houses. New construction is generally much cheaper than buying an existing house. The lack of new house building is reluctance to grant planning permission due to NIMBYism.
One of the points of an LVT, among other things, is to encourage little old ladies living in 4 bedroom houses to move somewhere smaller. It’s actually a very equitable tax that reduces distortions in markets and reduces inequality. I highly encourage you to read up on it.
https://en.wikipedia.org/wiki/Land_value_tax
One of the points of an LVT, among other things, is to encourage little old ladies living in 4 bedroom houses to move somewhere smaller. It’s actually a very equitable tax that reduces distortions in markets and reduces inequality. I highly encourage you to read up on it.
https://en.wikipedia.org/wiki/Land_value_tax
People aren't paying huge sums for houses or paying for new construction, property developers are.
Investment in the housing market drives up supply of buildings, and drives up the cost of the land underneath them. In high-cost markets, most of the cost is the land, not development on that land.
You can waive the higher taxes for very high density developments. Skyscrapers to require investors, and that is beneficial.
You can waive the higher taxes for very high density developments. Skyscrapers to require investors, and that is beneficial.
A progressive land tax would encourage investors to have few but high quality/density properties. The tax would be something like 2% for the individual home owner with less than 1000m^2 of land and 10% for companies owning 5000m^2 or more land.
They're not imposing tax penalties, they just got rid of the tax breaks.
You can no longer claim a mortgage as an 'expense' when calculating your profits.
That's not how it works for other companies, loan repayments are not classified as an expense to reduce your profits.
So now they have to pay the same tax rate as other businesses, where before they were getting a huge tax break.
You can no longer claim a mortgage as an 'expense' when calculating your profits.
That's not how it works for other companies, loan repayments are not classified as an expense to reduce your profits.
So now they have to pay the same tax rate as other businesses, where before they were getting a huge tax break.
To be 100% completely honest, home building needs to be one of our basic skills taught in school. That along with chopping down the building codes for small homes to be extremely simple. I'm not saying we support shanty homes everywhere, but the problem we have is that investors are buying up all the perfect homes and most homes are perfect homes. Maybe we should have less than perfect homes that aren't valued so high and sought out by investors that live in China.
This is incredibly true.
Homes don't even need to be that small. Buying a chunk of land with enough trees to build a home is <$5k, if you're willing to live in the middle of nowhere.
You need the equivalent of a Ph.D in zoning, permitting, and municipal regulations to do that, though.
And if each high school class, as a year-long class project, build a home, I think my kid would get a better education and we'd have more homes.
Plus, most people need to bring in specialists to do all the maintenance because we have no idea how our homes work. I'd like to run ethernet in my house, and I have no idea what's inside my walls, how to get in there, or how not to break things. That's embarrassing.
Homes don't even need to be that small. Buying a chunk of land with enough trees to build a home is <$5k, if you're willing to live in the middle of nowhere.
You need the equivalent of a Ph.D in zoning, permitting, and municipal regulations to do that, though.
And if each high school class, as a year-long class project, build a home, I think my kid would get a better education and we'd have more homes.
Plus, most people need to bring in specialists to do all the maintenance because we have no idea how our homes work. I'd like to run ethernet in my house, and I have no idea what's inside my walls, how to get in there, or how not to break things. That's embarrassing.
> community BBQs, and live in real communities
The sad reality is that people want their own BBQ and not really mix with their neighbours. That’s what poor people have to put up with, so to speak.
The sad reality is that people want their own BBQ and not really mix with their neighbours. That’s what poor people have to put up with, so to speak.
I massively disagree - the reason people want their own BBQ is that they dont know, and hence dont trust their neighbours. My parents knew ~100 people on the same street, these days average person know zero.
Ownership is important, it's a personal investment. For millenials all of our money is going to the boomers etc we rent from, those of which who do own property (because I know many of them don't) make it big on buying when house prices were actually reasonable, then downsize their house in London and get a nice big house build in Spain to retire to.
When millenials reach retirement age, a house, as for all previous generations, is the best option for financial security for retirement/end of life. Fewer and fewer of us will have that option I think.
When millenials reach retirement age, a house, as for all previous generations, is the best option for financial security for retirement/end of life. Fewer and fewer of us will have that option I think.
Unfortunately “community barbecues” oftentimes meant “barbecues with people who are exactly like me and who think exactly like I do”, an attitude which has had a pretty corrosive effect on democracy in the near past.
Otoh we’re self sorting more than ever aren’t we?
I would bet that the people in your neighbourhood (weak self selection) are going to have greater diversity of opinion than whatever bubble we currently exist in (strong self selection).
Homeownership is a great ideal. Letting people work towards having a place to live without paying rent is great for independence.
What is stupid is promoting Homeownership as a personal investment for the individual home-owner. A home is already a great thing to own financially, because it 'produces' not having to pay rent. There is no need to also have it pay 5% a year for people who have 100% leverage (which is very common in the Netherlands for mortgages).
But politicians get lots of votes by making the current middle class richer for owning homes. Nevermind that it is bad long-term as people have been saying for the last 20 years.
What is stupid is promoting Homeownership as a personal investment for the individual home-owner. A home is already a great thing to own financially, because it 'produces' not having to pay rent. There is no need to also have it pay 5% a year for people who have 100% leverage (which is very common in the Netherlands for mortgages).
But politicians get lots of votes by making the current middle class richer for owning homes. Nevermind that it is bad long-term as people have been saying for the last 20 years.
Just a note that 100% leverage would mean that you’re borrowing against 100% of the portion of the asset you bought to purchase more of the asset. I.e. you put 50% money down and borrowed to buy the other 50%.
A typical 20% down-payment in the US gets you 400% leverage (you used your 20% ownership 4 times over in order to purchase the other 80%).
5% down gets you 1900% leverage.
If you put $50000 down (5%) on a $1M home, it rises by 1% ($10000) and you sell it, then you just made a 20% return on your initial investment. You were leveraged 1900%, and so you got a return 1900% above what you would have without borrowing any $. Nobody serious advises that kind of leverage on any asset except for real-estate, AFAIK.
A typical 20% down-payment in the US gets you 400% leverage (you used your 20% ownership 4 times over in order to purchase the other 80%).
5% down gets you 1900% leverage.
If you put $50000 down (5%) on a $1M home, it rises by 1% ($10000) and you sell it, then you just made a 20% return on your initial investment. You were leveraged 1900%, and so you got a return 1900% above what you would have without borrowing any $. Nobody serious advises that kind of leverage on any asset except for real-estate, AFAIK.
True, my bad.
In that case, Dutch mortgages allow "infinite" leverage.
There are some fixed cost: transfer tax, mortgage fee, notary fees, etc. (It used to be you could also finance these). But the full amount that will be transferred to the seller can be financed.
There are some fixed cost: transfer tax, mortgage fee, notary fees, etc. (It used to be you could also finance these). But the full amount that will be transferred to the seller can be financed.
In a perfect market where there was always enough housing and rental units to supply the demand, rent would just end up settling at the same price as owning. See price vs rent index.
Land ownership tax doesn't work because land is a basic need. You have to exist somewhere. The problem isn't ownership of land, it's excessive ownership of land. Ownership of land beyond need into greed. You can easily design land ownership tax like income tax where people who own more pay more. People who own enough for their family are not taxed at all and if you want more you pay a lot more.
Of course there is the usual issue of the definition of "enough" but those kind of questions are solved all the time in parliaments. This all or nothing behavior is what harms the prospect of land tax.
Of course there is the usual issue of the definition of "enough" but those kind of questions are solved all the time in parliaments. This all or nothing behavior is what harms the prospect of land tax.
Well, when people talk about wealth taxes those are always above a certain threshold. I am perfectly fine with taxing excessive ownership of land. We don't need the theoretically perfect utopia. We need something that is good enough to give us another 80 years of peace.
Sounds like you haven’t heard much if the theory behind LVT.
For example one way it aligns incentives is pressuring land to be put to more productive use. Aka if someone can’t afford the taxes they might have to sell it to someone who can and likely that second entity will build more units on the land which utilizes the land more efficiently. Not in every instance perhaps but enough to matter. Its a way of forcing communally central land to be put to good use and for the profitability to feed back into the community.
For example one way it aligns incentives is pressuring land to be put to more productive use. Aka if someone can’t afford the taxes they might have to sell it to someone who can and likely that second entity will build more units on the land which utilizes the land more efficiently. Not in every instance perhaps but enough to matter. Its a way of forcing communally central land to be put to good use and for the profitability to feed back into the community.
How about a land value tax with an exemption for primary residence?
We have straight property tax in Cambridge(ma United States). If you live if your unit they’ll reduce the value that is taxed (by about 400000$ Or about $2500)
I’m not sure it’s helped, but it might be worse without it.
https://www.cambridgema.gov/departments/finance/propertytaxi...
I’m not sure it’s helped, but it might be worse without it.
https://www.cambridgema.gov/departments/finance/propertytaxi...
This sounds like a reasonable trade off which doesn’t hVe the risk of uprooting people from their primary residence.
I like it too, but it seems to incentivize sprawl. If people attempt to lease land the LVT will be passed to their tenants. To avoid paying the LVT, tenants will look for new construction.
Isn't this a good thing? The more constructions, the more housing.
Higher fossil fuel taxes would counter the sprawl incentive.
It would certainly be better than nothing. You can then add some sort of capital gains on primary residences so taxes will be paid on sale not during use.
It seems to me that a LVT eventually leads to 100% of the land being owned by the super wealthy in dense areas. It's a state sponsored transfer of wealth. It still results in a middle-man that leeches money from renters, and the taxes would most likely be passed onto them.
In this case, why not just be direct and have the land owned by the state, and have density requirements for use of that land based on population of the area?
In this case, why not just be direct and have the land owned by the state, and have density requirements for use of that land based on population of the area?
LTV won’t work in the UK land ownership is way too concentrated and leaseholds give land owners an easy tool to transfer the cost to the leaseholders.
London and other metropolitan areas still have a lot of low income housing in very high value areas, there are current/former council houses in Westminster and Kensington and Chelsea for example that sit on land worth billions.
LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive (and since many newly developed terraced, detached and townhouses also come as leasehold these days even buying a house won’t help) and just push for further gentrification as housing like this https://en.m.wikipedia.org/wiki/Hallfield_Estate would become economically non-viable.
London and other metropolitan areas still have a lot of low income housing in very high value areas, there are current/former council houses in Westminster and Kensington and Chelsea for example that sit on land worth billions.
LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive (and since many newly developed terraced, detached and townhouses also come as leasehold these days even buying a house won’t help) and just push for further gentrification as housing like this https://en.m.wikipedia.org/wiki/Hallfield_Estate would become economically non-viable.
"leaseholds give land owners an easy tool to transfer the cost to the leaseholders"
This relationship has always reminding me of medieval surfdom, i think it's deeply unfair and rigged and needs to be abolished.
This relationship has always reminding me of medieval surfdom, i think it's deeply unfair and rigged and needs to be abolished.
It is the UK never really had a “democratization” of land ownership like the rest of Europe especially following WW2.
https://www.ducksters.com/history/middle_ages_feudal_system....
>Lords and Knights - The lords ran the local manors. They also were the king's knights and could be called into battle at any moment by their Baron. The lords owned everything on their land including the peasants, crops, and village.
It was not the king (the government) but the local lord (the property owner) that abused his subjects the most.
>Lords and Knights - The lords ran the local manors. They also were the king's knights and could be called into battle at any moment by their Baron. The lords owned everything on their land including the peasants, crops, and village.
It was not the king (the government) but the local lord (the property owner) that abused his subjects the most.
>LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive
Increasing the cost of ownership makes it more expensive to speculate on real estate which would drive prices down. The most speculative assets have no maintenance costs.
Increasing the cost of ownership makes it more expensive to speculate on real estate which would drive prices down. The most speculative assets have no maintenance costs.
Wouldn't a land value tax encourage urban sprawling ?
Current ubran policies in the western world, coupled with the normalization of remote working already do this to some extent.
Current ubran policies in the western world, coupled with the normalization of remote working already do this to some extent.
On the contrary, a land value tax is often proposed to discourage sprawl. Since a land value tax is the same whether you leave a lot vacant or build a single family home or a multi family home, it encourages density and leads to less sprawl.
Sprawling to where? It’s an island
It would probably encourage less urban sprawl by driving more efficient use of city center land and housing.
It depends. If owned land is converted for rent then the LVT is passed on to the tenant. To avoid paying the LVT tenants are incentivized to own, which may imply buying new construction.
As population density increases, desirability increases, and people may try investing with the goal of renting, which with an LVT will more sharply decrease the desirability of population density.
As population density increases, desirability increases, and people may try investing with the goal of renting, which with an LVT will more sharply decrease the desirability of population density.
> To avoid paying the LVT tenants are incentivized to own
LVT is paid by the owner of the land. That is the whole point of a LVT, that you cannot avoid it.
LVT is paid by the owner of the land. That is the whole point of a LVT, that you cannot avoid it.
On paper, yes, but it'll just get passed on to the renter.
Renters would pay the same rents they do now.
For some landlords that would cover their tax bill. Others not so much.
It would precipitate a collapse in property values, but not a rise in rents.
For some landlords that would cover their tax bill. Others not so much.
It would precipitate a collapse in property values, but not a rise in rents.
I must sincerely ask you if you read my original comment and the person I am replying to:
As population density increases, desirability increases, and people may try investing with the goal of renting, which with an LVT will more sharply decrease the desirability of population density.
An LVT can incentivize sprawl because all else equal the LVT would ultimately be passed on to renters.
As population density increases, desirability increases, and people may try investing with the goal of renting, which with an LVT will more sharply decrease the desirability of population density.
An LVT can incentivize sprawl because all else equal the LVT would ultimately be passed on to renters.
But all else isn’t equal – denser places have less land per house.
With a property tax, the total tax bill increases when you build upward and make the apartment block. If you take a lot with a single home on it, and then stack 9 identical homes on top, the resulting property might be worth 9x as much. That’d mean the renters of that bottom home still have to pay 90% of their old property tax.
With LVT, the tax bill is based on whether you could build up productively, whether or not you actually choose to do so. So if you stack 10 family homes on top of one another, the renters of those homes would pay 1/10th the land tax.
This shifts the relative tax burden toward lots which are less dense than their surroundings. Encouraging infill and discouraging sprawl. If it pushes some to build their single family home in the exurbs so that an apartment block can be built in the suburbs, that’s a net win.
With a property tax, the total tax bill increases when you build upward and make the apartment block. If you take a lot with a single home on it, and then stack 9 identical homes on top, the resulting property might be worth 9x as much. That’d mean the renters of that bottom home still have to pay 90% of their old property tax.
With LVT, the tax bill is based on whether you could build up productively, whether or not you actually choose to do so. So if you stack 10 family homes on top of one another, the renters of those homes would pay 1/10th the land tax.
This shifts the relative tax burden toward lots which are less dense than their surroundings. Encouraging infill and discouraging sprawl. If it pushes some to build their single family home in the exurbs so that an apartment block can be built in the suburbs, that’s a net win.
Overly optimistic. If you stack 10 family homes the land is now 10x more valuable and gets taxed accordingly.
If you bring more families into an area, the land around them may become more valuable, but there’s no reason that effect would be localised to the apartment block.
This is the core distinction between LVT and property tax.
This is the core distinction between LVT and property tax.
That makes no sense. If land affects the value of the land around it then it had to have gone up.
If you put 10 family dwellings on land, then its value is at least that of 10 family dwellings. So each individual renter is somehow paying 1/10th the 10x greater cost. You haven't reduced the LVT by sharing it between the LVT between the renters, they're all paying the same or more.
If you put 10 family dwellings on land, then its value is at least that of 10 family dwellings. So each individual renter is somehow paying 1/10th the 10x greater cost. You haven't reduced the LVT by sharing it between the LVT between the renters, they're all paying the same or more.
>people may try investing with the goal of renting, which with an LVT will more sharply decrease the desirability of population density.
I dont see how that follows - you stated it but did not explain the mechanism by which it happens.
Population density would flow from the land value as it does now, albeit more efficiently since inefficiently used land would not just mean minimized profits but large losses.
I dont see how that follows - you stated it but did not explain the mechanism by which it happens.
Population density would flow from the land value as it does now, albeit more efficiently since inefficiently used land would not just mean minimized profits but large losses.
On paper it will be passed to the renter. The owner of the land obtains returns through rent seeking.
If he raises his rents to the maximum that renters are willing to pay then the value of the land grows and he has to pay more land value taxes. He actually cannot make land more expensive. He can only make the land as expensive as it already is.
Of course, it is entirely possible that the effective tax burden on the tenant has risen in the process. For that reason I would encourage the government to reduce income taxes.
If he raises his rents to the maximum that renters are willing to pay then the value of the land grows and he has to pay more land value taxes. He actually cannot make land more expensive. He can only make the land as expensive as it already is.
Of course, it is entirely possible that the effective tax burden on the tenant has risen in the process. For that reason I would encourage the government to reduce income taxes.
Currently, the owner could rent out 2 units on the land and break even. But really there could be 12 units there. LVT raises the taxes as if there were 12 units. This will bring the break-even point to renting out 6 units. The owner has to either build out the property (increasing supply, driving down rental prices), sell to someone who will, or lose money.
That's also why there shouldn't be an exemption for first home.
Obviously made up those numbers but hope you get the idea.
That's also why there shouldn't be an exemption for first home.
Obviously made up those numbers but hope you get the idea.
How would it encourage urban sprawling?
Preosumably the closer to the city centre the higher the per square fot value so to minimise costs you move to the edge of town, thus sprawl.
Or you buy an apartment in a high rise and share the cost with the other residents.
It would certainly discourage the building of houses in the city centre.
It would certainly discourage the building of houses in the city centre.
> It would certainly discourage the building of houses in the city centre.
No, that's not how it works. The value of a property is made up of the value of the land and the value of the buildings on it. If one of these two components is taxed, its value is reduced. However, it is important to remember that the supply of land is fixed, but the supply of buildings is not. If one taxes buildings, as is the case with a traditional property tax, construction activity is reduced, but if one taxes only land, as is the case with a land value tax, construction activity is not impeded at all. That's the beauty of a land value tax: it doesn't distort anything.
With a property tax, an undeveloped lot in the center of town is taxed less than a high-rise. With a land value tax, both are taxed at the same rate. Relatively speaking, a property tax promotes sprawl, a land value tax promotes density.
No, that's not how it works. The value of a property is made up of the value of the land and the value of the buildings on it. If one of these two components is taxed, its value is reduced. However, it is important to remember that the supply of land is fixed, but the supply of buildings is not. If one taxes buildings, as is the case with a traditional property tax, construction activity is reduced, but if one taxes only land, as is the case with a land value tax, construction activity is not impeded at all. That's the beauty of a land value tax: it doesn't distort anything.
With a property tax, an undeveloped lot in the center of town is taxed less than a high-rise. With a land value tax, both are taxed at the same rate. Relatively speaking, a property tax promotes sprawl, a land value tax promotes density.
That's essentially my point. A house in the city center which consumes the same amount of land as an apartment block would face the same tax bill.
Who would want that house with that tax bill?
Who would want that house with that tax bill?
Someone who wants to demolish it and turn it into an apartment building! That’s literally the point of LVT: incentivizing increasingly efficient usage of land in high-value areas.
The bill is high because people are willing to pay it. If the neighboring properties are 3 story multifamily buildings then this one will be upgraded to a 3 story building as well.
If you're taxed on the value of the land, rather than the value of the property built on top of that land, it arguably incentivizes buying super-cheap exurban land and planting massive McManisions on it.
Obviously in real life, people care about other things besides just pure acreage, but you can see the argument.
Obviously in real life, people care about other things besides just pure acreage, but you can see the argument.
If people only cared about land area, the distinction between urban and non-urban land wouldn't even exist.
What makes urban land special is the infrastructure, schools, workplaces, restaurants, cafés, theaters, libraries. These things make a city a city. These things promote density because people cluster around them.
As I explained in another comment[1], a property tax discourages density and encourages sprawl. A land value tax, on the other hand, does not have these adverse effects on density because it taxes only the fixed supply of land, not the variable supply of buildings.
[1] https://news.ycombinator.com/item?id=28423428
As I explained in another comment[1], a property tax discourages density and encourages sprawl. A land value tax, on the other hand, does not have these adverse effects on density because it taxes only the fixed supply of land, not the variable supply of buildings.
[1] https://news.ycombinator.com/item?id=28423428
Aspiring single-family home dwellers will go farther afield in search of less-taxed land
Maybe they will go to smaller metropolitan area instead?
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It’s a nice theory but it would involve tossing people out of their homes because they can’t afford the tax. If you make an exception for them, then the entire system is defunct because it’ll just be a web of exceptions that just create a “housing elite” that is exempt from the rules.
The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
Well, you don't have to make "tossing people out of their homes" a horrifying experience. If the eviction process on your primary residence granted you 3 years to pay the tax then it would be exceedingly unlikely that anyone would get kicked out because of a sudden real estate boom or bust.
As a concession the debt can be reassessed at any time during those 3 years. If there is a boom that makes the tax excessive followed by a bust that reduces the value of the land by 50% then your tax bill would also go down by 50%.
>The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
That's the entire goal behind the land value tax.
As a concession the debt can be reassessed at any time during those 3 years. If there is a boom that makes the tax excessive followed by a bust that reduces the value of the land by 50% then your tax bill would also go down by 50%.
>The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
That's the entire goal behind the land value tax.
Who’s getting tossed out of homes? If they own any part of it, they can sell their land at its new higher value and pocket their share of the gains. Then the can either move into a nearby newly redeveloped multi-unit building (increased efficiency as incentivized by LVT) or they can move further out to land with the same low value on which they used to live in a detached home.
This same type of thinking drives me crazy in CA where Prop 13 exists because someone might have to move because they’ve made a million dollars in house value (simply by existing) that they might have to realize.
This same type of thinking drives me crazy in CA where Prop 13 exists because someone might have to move because they’ve made a million dollars in house value (simply by existing) that they might have to realize.
You just described someone forced out of their home.
And very precisely, too. They can't afford to keep their home because since other people want it, the taxes rise. The only solution is to sell to one of those people who wants it, and to move to a less desired home.
1) The buyer is pricing the house at its worth minus its future tax liabilities (which is what the seller receives), and the seller will use that money to purchase another house which also has tax liabilities. That house has to be worse, or the tax liabilities lower (or in the same general tax area, both.)
2) The seller is in an appreciating asset, but can't choose when to sell. They must sell when the tax liabilities become too much[*]. Meaning they must regardless of whether the property will probably continue to appreciate. This is a wealthy buyer's advantage over the seller, although this is partially ameliorated by competition between wealthy buyers who have priced in likely appreciation. But a very wealthy buyer can create appreciation through buying nearby properties to control the area, and through lobbying.
3) Also, real estate tax law tends to benefit wealthy buyers who leave rental properties empty, and can use those liabilities to offset profits they make in another area.
This seems like a formula for downward mobility. And for people to be forced out of the neighborhoods where they have networks and jobs, and have to move to worse places where they have no networks, and are farther from jobs.
[*] In the worst case, they mortgage the home in order to pay the tax liabilities, and to extend the time before they must sell - meaning that when they sell, they're actually paying off back taxes with the money, meaning they have even less (or no) money for their next residence.
1) The buyer is pricing the house at its worth minus its future tax liabilities (which is what the seller receives), and the seller will use that money to purchase another house which also has tax liabilities. That house has to be worse, or the tax liabilities lower (or in the same general tax area, both.)
2) The seller is in an appreciating asset, but can't choose when to sell. They must sell when the tax liabilities become too much[*]. Meaning they must regardless of whether the property will probably continue to appreciate. This is a wealthy buyer's advantage over the seller, although this is partially ameliorated by competition between wealthy buyers who have priced in likely appreciation. But a very wealthy buyer can create appreciation through buying nearby properties to control the area, and through lobbying.
3) Also, real estate tax law tends to benefit wealthy buyers who leave rental properties empty, and can use those liabilities to offset profits they make in another area.
This seems like a formula for downward mobility. And for people to be forced out of the neighborhoods where they have networks and jobs, and have to move to worse places where they have no networks, and are farther from jobs.
[*] In the worst case, they mortgage the home in order to pay the tax liabilities, and to extend the time before they must sell - meaning that when they sell, they're actually paying off back taxes with the money, meaning they have even less (or no) money for their next residence.
Re: 3, you can’t apply non-LVT outcomes to an LVT scenario. The tax situation would eventually force the redevelopment of the lot (outside of a few super-rich owners who want a trophy SFH and are inelastic to tax pressure), bringing more density and opportunity for people to live in valuable space.
This happens now anyway, except currently people are priced out by an increasing cost of goods and services and then forced to leave the area entirely. The idea/hope/whatever behind LVT is that it would force redevelopment into more density, allowing more people to live in valuable areas while keeping cost of living flat and manageable. Density is the end-goal of LVT proponents.
I admit I don’t have a lot of attachment to a given plot of land, and understand some people place more value on that. But it’s also pretty selfish for one person/family to claim a plot in a productive market to the exclusion of ten others by standing in the way of densification. It’s a question of singular good vs that of the collective, and there is no right answer there at which point I guess it’s agree to disagree?
I admit I don’t have a lot of attachment to a given plot of land, and understand some people place more value on that. But it’s also pretty selfish for one person/family to claim a plot in a productive market to the exclusion of ten others by standing in the way of densification. It’s a question of singular good vs that of the collective, and there is no right answer there at which point I guess it’s agree to disagree?
how is land value tax any different from a property tax that all homeowners already pay?
If anything, it might end up being lower tax on residential housing, and much higher on commercial/retail.
If anything, it might end up being lower tax on residential housing, and much higher on commercial/retail.
Property tax increases when you improve the property, and land value tax does not. Therefore, property tax creates a disincentive to improve property, and land value tax creates an incentive to improve property.
In contrast to the property tax, the land value tax only taxes the value of the land, not the value of the buildings. A land value tax is always the same regardless of whether the land is undeveloped, a single-family house or an apartment building. A property tax, on the other hand, encourages the former and discourages the latter. A property tax encourages urban sprawl, a land value tax does not.
Thanks for the review it comes like a revelation.
I don't understand how this would work. How do people rent? Obviously many people can't or do not wish to own their house for any number of reasons. Who will own houses that are rented? I used to live in Amsterdam as an expat, and rented from a landlord who owned several homes in Amsterdam. Would she not be able to own and rent these homes under this scheme?
The social housing system seemed to be abused when I was there. I had a number of Dutch friends still living in social housing places they'd rented as students on very low incomes, and were still renting 10 years later. For the same 300 euro per month, when they were now earning 6-7000 euro/month. I could never understand why this wasn't means tested continually.
The social housing system seemed to be abused when I was there. I had a number of Dutch friends still living in social housing places they'd rented as students on very low incomes, and were still renting 10 years later. For the same 300 euro per month, when they were now earning 6-7000 euro/month. I could never understand why this wasn't means tested continually.
Designations. That's how. Some houses are built and intended to be rented out to people. These houses are constructed entirely by companies (or people) for that purpose alone.
Other houses are meant to be for purchase, and purchase only. If you purchase a house like this and then rent it out, that should be considered breaking the intended designation.
So if you as an individual want to own multiple houses to rent out, you need to find houses with that designation and that are for sale. Alternatively, you need to find ground with the "rental housing"-designation and build a house or multiple houses on there.
You can do this in a collective of individuals, too.
And people who currently own multiple houses that were not meant to be rented out (but are rented out to other people) would need, by law, to either sell those properties (the current renter should get the first option on the house's current market value price).
And honestly, I feel that the people renting houses that were never meant for rental should get a discount. And that discount should come out of the pockets of the government.
And yes, I'm a Dutch citizen. I know that means my tax money is going to help these people buy their houses a little cheaper at my expense. I'm fine with that as it would create a healthier housing market for everyone. That's exactly what my tax money is for.
Other houses are meant to be for purchase, and purchase only. If you purchase a house like this and then rent it out, that should be considered breaking the intended designation.
So if you as an individual want to own multiple houses to rent out, you need to find houses with that designation and that are for sale. Alternatively, you need to find ground with the "rental housing"-designation and build a house or multiple houses on there.
You can do this in a collective of individuals, too.
And people who currently own multiple houses that were not meant to be rented out (but are rented out to other people) would need, by law, to either sell those properties (the current renter should get the first option on the house's current market value price).
And honestly, I feel that the people renting houses that were never meant for rental should get a discount. And that discount should come out of the pockets of the government.
And yes, I'm a Dutch citizen. I know that means my tax money is going to help these people buy their houses a little cheaper at my expense. I'm fine with that as it would create a healthier housing market for everyone. That's exactly what my tax money is for.
So the solution to government interference in the market (by preventing adequate building from occurring) is yet more interference, and that interference will by fiat somehow lower prices, but without dramatically increasing supply.
What could possibly go wrong??
What could possibly go wrong??
The government isn't preventing anything, it's a free market. The only thing that needs to change is to prevent companies from buying houses meant to be sold for ownership who then rent them out instead. That is working against the people. The law would work for the people.
Thanks. What if I purchase a home, to live in. Then I take a job overseas and move for 2-3 years. Must I sell the house rather than rent it out on a short term basis?
There are special rules for that specific scenarios. As long if you don’t live in the Netherlands yourself and it is the only property you own
Markets don't need exceptions, they adapt. With property/price/rent controls, it comes down to a committee of "experts" or it becomes effectively closer to community property with the tragedy of the commons. IMO, reduce the restrictions on new development and creative use, e.g., by cutting back on zoning to allow higher density development and reduce the ability of neighbors to stop development of neighbor properties (due to aesthetic or other concerns). Building codes and regulations shouldn't protect the consumer from himself, but rather protect the physical safety of adjacent properties. But it's too often used as an excuse to limit competition and preserve the privilege of the early entrants.
We also need to acknowledge that cities inevitably increase in density, which necessarily means apartments, etc. Protecting single-family residences near city centers is a subsidy to them that we should not pay any longer.
We also need to acknowledge that cities inevitably increase in density, which necessarily means apartments, etc. Protecting single-family residences near city centers is a subsidy to them that we should not pay any longer.
"Adapt"? They've "adapted" by milking Amsterdam tenants dry for many years already.
And the "tragedy of the commons" is essentially a red-Herring fallacy. It is perhaps valid at the most in a free-for-all rather than a commons. Where you have a commons, you have relations between the users of the common resources, and social structures for decision making about sharing and use, which prevent depletion of resources.
See also:
https://theanarchistlibrary.org/library/the-anarchist-faq-ed...
And the "tragedy of the commons" is essentially a red-Herring fallacy. It is perhaps valid at the most in a free-for-all rather than a commons. Where you have a commons, you have relations between the users of the common resources, and social structures for decision making about sharing and use, which prevent depletion of resources.
See also:
https://theanarchistlibrary.org/library/the-anarchist-faq-ed...
No.
For homes purchased after January 1st, you can still get a license to temporary rent out the home. But you'll need to have lived in the home yourself for at least 1 year. Temporary rentals can be done for 2 years at the moment, and extended once more, I assume the same would apply under the new law. So the 2-3 years could be covered.
Existing ownership isn't affected, as far as I know. This only would apply to new transactions.
For homes purchased after January 1st, you can still get a license to temporary rent out the home. But you'll need to have lived in the home yourself for at least 1 year. Temporary rentals can be done for 2 years at the moment, and extended once more, I assume the same would apply under the new law. So the 2-3 years could be covered.
Existing ownership isn't affected, as far as I know. This only would apply to new transactions.
> These houses are constructed entirely by companies (or people) for that purpose alone.
So private companies are allowed to engage in rent-seeking behavior but individuals aren't?
So private companies are allowed to engage in rent-seeking behavior but individuals aren't?
What individuals are you talking about that are not covered by '(or people)'?
People can make companies. You know that, right?
> And people who currently own multiple houses that were not meant to be rented out (but are rented out to other people) would need, by law, to either sell those properties (the current renter should get the first option on the house's current market value price).
What is the 'would need' referring to, your ideal situation, current law, or proposed law? If it's any of the last two, I don't think you're correct but I'd be happy to read any references you may have to substantiate this.
What is the 'would need' referring to, your ideal situation, current law, or proposed law? If it's any of the last two, I don't think you're correct but I'd be happy to read any references you may have to substantiate this.
This is one of those terribly myopic and symbolic policies that the Netherlands (despite generally one of the best governed countries in the world) keeps falling for.
Studies have shown over and over again that investors aren't causing the price increases in the Netherlands. Prices won't improve much.
Renting is going to take a beating, which is already an extremely small sector in the Netherlands, among the smallest in Europe. Remaining rental stock will be priced like crazy, pushing everyone desperately into a decision to buy. Due to systemic shortages that's not possible, exacerbating the gap between haves (who bought) and have-nots (who must keep renting).
Various studies have also shown a rental market is extremely important for labour mobility. Transient workers can't just move cities/regions in pursuit of jobs, when the rental market is completely destroyed and the only alternative is to buy a home and be stuck to that location for years (due to the friction and transaction costs of buying over renting).
> Would she not be able to own and rent these homes under this scheme?
She would, but she'd be unable to buy more off the market to rent out, unless they were already buy-to-let stock previously.
> I could never understand why this wasn't means tested continually.
Me neither. It seems like the least controversial thing that the left and the right should have agreement over: rich people not getting subsidised social housing. Things are getting better though, there's now means testing and accelerated rental price increases (up to a maximum) if your income is assessed as too high. But the new policy still way, way too generous to a class of rich people, while there's poor people waiting in line for 10 years in Amsterdam.
Studies have shown over and over again that investors aren't causing the price increases in the Netherlands. Prices won't improve much.
Renting is going to take a beating, which is already an extremely small sector in the Netherlands, among the smallest in Europe. Remaining rental stock will be priced like crazy, pushing everyone desperately into a decision to buy. Due to systemic shortages that's not possible, exacerbating the gap between haves (who bought) and have-nots (who must keep renting).
Various studies have also shown a rental market is extremely important for labour mobility. Transient workers can't just move cities/regions in pursuit of jobs, when the rental market is completely destroyed and the only alternative is to buy a home and be stuck to that location for years (due to the friction and transaction costs of buying over renting).
> Would she not be able to own and rent these homes under this scheme?
She would, but she'd be unable to buy more off the market to rent out, unless they were already buy-to-let stock previously.
> I could never understand why this wasn't means tested continually.
Me neither. It seems like the least controversial thing that the left and the right should have agreement over: rich people not getting subsidised social housing. Things are getting better though, there's now means testing and accelerated rental price increases (up to a maximum) if your income is assessed as too high. But the new policy still way, way too generous to a class of rich people, while there's poor people waiting in line for 10 years in Amsterdam.
> It seems like the least controversial thing that the left and the right should have agreement over: rich people not getting subsidised social housing.
The argument I've heard in Germany is that it's a good idea to have more socially mixed housing projects, so people who moved in as students are allowed to stay when they work full time. Initially they had to pay an extra fee ("Fehlbelegungsabgabe" = erroneous occupancy fee, but even with that it was much cheaper than regular housing), which was removed at some point.
The argument I've heard in Germany is that it's a good idea to have more socially mixed housing projects, so people who moved in as students are allowed to stay when they work full time. Initially they had to pay an extra fee ("Fehlbelegungsabgabe" = erroneous occupancy fee, but even with that it was much cheaper than regular housing), which was removed at some point.
Our social housing stock is already intended to be mixed (although the balance is often not great). You'll often find social and non-social housing units in the same apartment building, and definitely in every neighbourhood there will be a mix. I agree and think that mix is super important. But achieving it by giving rich people subsidised housing when there are poor people on a waiting list for these units, is one of the least optimal solutions, compared to alternatives.
Means testing would force medium-rich people to live on the streets (or with their parents), since there are no rental houses available between 700 and 1200 euro/month (that is, between social housing and the liberalized sector), and not all of them will be able to buy a home with the current prices.
We're talking about rich people occupying social homes intended for the poorest people. However bad it may be for 'medium-rich' people, it's much worse for poor. Any extreme outcome (like living on the streets) would have a much higher chance with poor, than medium-rich, who tend to have options. There's plenty of housing stock at 1200 a month that can be shared by two 'medium-rich' persons within a 45m commute from their work. No such options exist for poor people for whom social housing is intended. Of course means-testing will create issues for medium-rich, that's not the question, the question is if it's fair to protect them from these issues at the expense of the poor, by giving the rich subsidised housing intended for the poor. The answer is obviously (to me) no.
Fair enough. Though cynically speaking the people just above the social housing limit are probably a more interesting part of the electorate than the poor.
As above, you are presenting as a fact that investors aren't causing increasing prices. And as above, that is both uncited and, at the very least, a highly debatable 'fact'.
Even if not the only cause (is there ever just one isolated cause in economics), investing certainly is a big part.
Even if not the only cause (is there ever just one isolated cause in economics), investing certainly is a big part.
Basic economic theory says that the price is determined by supply and demand. Investors buying house does not affect supply or demand, since they will simply rent out the house.
If you claim that investors are causing a significant price increase then I think onus would be on you to cite a source.
If you claim that investors are causing a significant price increase then I think onus would be on you to cite a source.
"Studies have shown over and over again that investors aren't causing the price increases in the Netherlands"
Source(s), please.
Source(s), please.
Sibling comment: https://news.ycombinator.com/item?id=28425948
So the housing market is so inefficient that removing a significant source of demand won’t change prices?
That is an exceptional claim that requires exceptional evidence.
That is an exceptional claim that requires exceptional evidence.
No, that's not the claim. There's waterbed effects. Buy-to-let is done for the purpose of renting. If you take that rental supply away, rental prices go up, and demand for homes go up. Taking away buy-to-let demand thereby creates other demand that buy-to-let was supplying. You're just replacing the demand, not removing it.
Could you spell out why this doesn’t just move demand around? Aren’t the same number of people as before looking for a place to live?
(I also don’t know what you mean by “waterbed.”)
(I also don’t know what you mean by “waterbed.”)
It does just move supply/demand around, that's the waterbed effect.
If you remove buy-to-let investors, then buying a home becomes easier, but not necessarily any cheaper, because the rental supply (from buy-to-let) drops and therefore the prices of rentals go up, thereby increasing the demand for buying a home, countering the lower demand from buy-to-let investors. Demand has been moved around, the shortages are still as big, and there's no significant effect on prices.
If you remove buy-to-let investors, then buying a home becomes easier, but not necessarily any cheaper, because the rental supply (from buy-to-let) drops and therefore the prices of rentals go up, thereby increasing the demand for buying a home, countering the lower demand from buy-to-let investors. Demand has been moved around, the shortages are still as big, and there's no significant effect on prices.
New Zealand banned foreign buyers a couple years ago and house prices are up 20-50% nationwide since then.
https://i.stuff.co.nz/life-style/homed/119636052/foreign-buy...
The problem is that people chronically overestimate the number of foreign buyers in the market. I can't find data for the Netherlands online, but for other western nations, it is around four or five percent of demand. Removing that will have essentially no noticable impact on housing prices as NZ has learned.
The advantage of a foreign ban is political in nature. Foreigners can't vote in local elections, so politicians lose very little, and the actual electorate is satisfied that government is 'doing something' about the problem.
It's a no lose situation for the politician, but at best it does nothing to reign in the issue of housing costs, and at worst it fans the flames of xenophobia.
https://i.stuff.co.nz/life-style/homed/119636052/foreign-buy...
The problem is that people chronically overestimate the number of foreign buyers in the market. I can't find data for the Netherlands online, but for other western nations, it is around four or five percent of demand. Removing that will have essentially no noticable impact on housing prices as NZ has learned.
The advantage of a foreign ban is political in nature. Foreigners can't vote in local elections, so politicians lose very little, and the actual electorate is satisfied that government is 'doing something' about the problem.
It's a no lose situation for the politician, but at best it does nothing to reign in the issue of housing costs, and at worst it fans the flames of xenophobia.
Foreign investors account for more than half of total real estate investment flows in the Netherlands, see page 8
https://www.bouwinvest.nl/media/4305/bouwinvest-dutch-real-e...
https://www.bouwinvest.nl/media/4305/bouwinvest-dutch-real-e...
That is real estate investment flow. That's not the same thing as housing. The graph you linked shows the majority of the investment going into things like office space, industrial real estate, retail, hotels, healthcare, etc...
It must also be noted that the vast majority of these deals aren't homes on the market for locals, they're existing investor real estate.
Sometimes you see articles stating '25% of all homes last year were bought by investors', but failing to mention that 20% of that 25% were homes sold by investors, too. i.e. company A selling to company B, an apartment block fully rented out. Sometimes company A and B are part of the same group structure, and they're simply restructuring. And so really the percentage of investors buying homes that could otherwise be bought by citizens, is actually only 5%.
Secondly, there's a lot of international capital flowing in because capital is extremely mobile and knows no borders. It doesn't mean foreigners own the real estate. Everytime a Dutch investor (e.g. a Dutch pension fund) buys real estate, it typically finances it with a combination of its own money and borrowed money, and the borrowed capital is typically raised on international financial markets.
I find the news is quite unsophisticated in detailing these nuances, and typically chooses the most incendiary headline that they can get away with.
e.g. "25% of homes bought by foreign investors." or hell even "50% of real estate bought by foreign investors", instead of 5% of available homes bought-up by Dutch pension funds", all three statements could be based on the same data-set.
Sometimes you see articles stating '25% of all homes last year were bought by investors', but failing to mention that 20% of that 25% were homes sold by investors, too. i.e. company A selling to company B, an apartment block fully rented out. Sometimes company A and B are part of the same group structure, and they're simply restructuring. And so really the percentage of investors buying homes that could otherwise be bought by citizens, is actually only 5%.
Secondly, there's a lot of international capital flowing in because capital is extremely mobile and knows no borders. It doesn't mean foreigners own the real estate. Everytime a Dutch investor (e.g. a Dutch pension fund) buys real estate, it typically finances it with a combination of its own money and borrowed money, and the borrowed capital is typically raised on international financial markets.
I find the news is quite unsophisticated in detailing these nuances, and typically chooses the most incendiary headline that they can get away with.
e.g. "25% of homes bought by foreign investors." or hell even "50% of real estate bought by foreign investors", instead of 5% of available homes bought-up by Dutch pension funds", all three statements could be based on the same data-set.
Foreign buyers isn’t generally a problem on a national level but on a city or neighborhood level where specific areas are targets.
Even still, home prices have risen the fastest in Auckland.
This is called scheefwonen – which roughly translates to "crooked living" – and has been a point of attention for several decades at least, more or less as long as I can remember.
It's a bit of a difficult problem, because you don't really want to kick people out of their house just because they have a better-paying job, and especially in the current climate these people don't really have anywhere to go; €7k people will probably manage, but €4k/month will have a harder time finding something affordable.
It's a bit of a difficult problem, because you don't really want to kick people out of their house just because they have a better-paying job, and especially in the current climate these people don't really have anywhere to go; €7k people will probably manage, but €4k/month will have a harder time finding something affordable.
I agree that evictions is an extreme measure and to be used as a last resort. I think it should be part of the policy instruments to be used, under the right circumstances. e.g. if you make 1.5x the wage that would give you a right to a social home, averaged over 3 years, then you get a 2 year period to move out.
That means you won't move out until 5 years after you've started earning more, and if your earnings were temporarily high, you get to stay. But if you're consistently earning a ton, you have to leave.
That's not so crazy considering that there's people who're low-income on a 10y waiting list for the home you'd be occupying, there has to be a mechanism that makes you have to leave. Yes it's hard to find something great at 3-4k, but it's even harder for someone at 2k who's 'spot' you're occupying. That could be limited to 5 years.
Everyone has a hard time finding a place, but why are some rich getting subsidised indefinitely at the expense of some poor?
But apart from evictions, I've never understood why we can't simply have dynamic rental rates adjusted to the market rate. I know people who live in Zuid for 500 a month in a home that's 1500 market rate, and their household income is 3x the average. Why can they not be made to pay 1500 to the social housing association? When they move out, the home reverts back to the subsidised rate for a low-income family.
I understand this can't be done on old contracts with no contractual clauses that make this possible, contracts are contracts after all. But we've had this situation for many years, and new contracts still allow the possibility of consequence-free scheefwonen. That's pretty absurd to me.
That means you won't move out until 5 years after you've started earning more, and if your earnings were temporarily high, you get to stay. But if you're consistently earning a ton, you have to leave.
That's not so crazy considering that there's people who're low-income on a 10y waiting list for the home you'd be occupying, there has to be a mechanism that makes you have to leave. Yes it's hard to find something great at 3-4k, but it's even harder for someone at 2k who's 'spot' you're occupying. That could be limited to 5 years.
Everyone has a hard time finding a place, but why are some rich getting subsidised indefinitely at the expense of some poor?
But apart from evictions, I've never understood why we can't simply have dynamic rental rates adjusted to the market rate. I know people who live in Zuid for 500 a month in a home that's 1500 market rate, and their household income is 3x the average. Why can they not be made to pay 1500 to the social housing association? When they move out, the home reverts back to the subsidised rate for a low-income family.
I understand this can't be done on old contracts with no contractual clauses that make this possible, contracts are contracts after all. But we've had this situation for many years, and new contracts still allow the possibility of consequence-free scheefwonen. That's pretty absurd to me.
> Obviously many people can't or do not wish to own their house for any number of reasons
"Those reasons" being that the price of real estate in Amsterdam has grown exponentially in recent years.
Some large but unknown number of apartments here have vanished into private investments where no one lives or AirBNB etc where no one lives for more than a few days.
If houses in Amsterdam were reserved for people _living_ in Amsterdam, there would be a significant increase in supply, and therefore a significant decrease in prices, which right now, are such that your average Amsterdam worker can't live here.
> The social housing system seemed to be abused when I was there.
Still is, but I see this as rational calculation on the part of the Gemeente (municipality, these are much more powerful here).
Those apartments aren't palatial. Most of the time, people just naturally move out, maybe a few years late, but why force people onto the street when they're just getting started?
Some number of people do go on for years, but they calculate that it's better to have a more relaxed system, not to cause grief by going after a few freeloaders, and to spend their efforts on building brand-new public housing.
---
I had to get over 30 years of NYC living when I moved here. But the Gemeente is pretty smart. There's a reason for most everything, often a good reason, and they are constantly tuning.
Sure, I have complaints, but generally if I wonder why something is there or what's going to happen in terms of public works, I say, "What would a competent person do?" That almost never worked in NYC.
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Did you know they're talking about banning cruise ships from part of the river IJ, raising the river bed there by 4 meters so they can put a bike path underneath it? And by gum, they might just do that.
"Those reasons" being that the price of real estate in Amsterdam has grown exponentially in recent years.
Some large but unknown number of apartments here have vanished into private investments where no one lives or AirBNB etc where no one lives for more than a few days.
If houses in Amsterdam were reserved for people _living_ in Amsterdam, there would be a significant increase in supply, and therefore a significant decrease in prices, which right now, are such that your average Amsterdam worker can't live here.
> The social housing system seemed to be abused when I was there.
Still is, but I see this as rational calculation on the part of the Gemeente (municipality, these are much more powerful here).
Those apartments aren't palatial. Most of the time, people just naturally move out, maybe a few years late, but why force people onto the street when they're just getting started?
Some number of people do go on for years, but they calculate that it's better to have a more relaxed system, not to cause grief by going after a few freeloaders, and to spend their efforts on building brand-new public housing.
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I had to get over 30 years of NYC living when I moved here. But the Gemeente is pretty smart. There's a reason for most everything, often a good reason, and they are constantly tuning.
Sure, I have complaints, but generally if I wonder why something is there or what's going to happen in terms of public works, I say, "What would a competent person do?" That almost never worked in NYC.
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Did you know they're talking about banning cruise ships from part of the river IJ, raising the river bed there by 4 meters so they can put a bike path underneath it? And by gum, they might just do that.
> I could never understand why this wasn't means tested continually.
They've started some degree of means testing a few years ago: the maximum allowed rent increase on social/rent-controlled houses can now depend on income. This was controversial legislation for privacy reasons (it involves giving landlords information about tenant incomes every year).
They've started some degree of means testing a few years ago: the maximum allowed rent increase on social/rent-controlled houses can now depend on income. This was controversial legislation for privacy reasons (it involves giving landlords information about tenant incomes every year).
Oh, I missed that one. It seems to me that income tax based on rent would be more privacy preserving.
I guess this is only for new sales. The point is that there is plenty of people wanting to buy a home in Netherlands, they just can’t pay the same price as investors. With this law the seller will have to lower the price till some person who wants to live there can afford it
We had housing cooperation's for a century until they were forced by consecutive right wing governments to sell their houses, and thus ruining a system that was well working, except for rich friends of the right wing government to speculate with the housing system, which is taking place now.
One of the dumbest things to do with government owned land is to sell it. You get a quick injection of cash and then the money runs out just as quickly. Meanwhile the land keeps going up in value forcing the government to subsidize housing for low income earners. If the government kept the land it could lease it out at reasonable rates and have an ongoing income stream.
Shades of Berlin here. They sold land and buildings for very cheap to big companies like Deutsche Wohnen, and now there is a vote to buy back the properties at red-hot market prices and give people cheaper rent. Lose-lose in every way for the Berlin taxpayer.
And before that we had woningbouw verenigingen. Non profits ran by their tenants. Something like: God fearing church goers wouldn't stand for hard working newly wed couples not getting a home.
We are talking about the same... I said cooperation's, not corporations.
I live in social housing (in the UK), and could easily afford to buy or rent non-social... and I was already in that situation when my current tenancy started.
You could say I abuse it, and I agree in principal. However, I'm only abusing it because social housing is scarce. The solution is to build more, and I do my bit by voting for a government that would probably do that.
If they ever decided to make it means tested, and my tenancy was at risk, I would just buy the house.
You could say I abuse it, and I agree in principal. However, I'm only abusing it because social housing is scarce. The solution is to build more, and I do my bit by voting for a government that would probably do that.
If they ever decided to make it means tested, and my tenancy was at risk, I would just buy the house.
Making use of any scarce resource intended for the poor, while you're rich, because it's so scarce, is beyond backwards... I have trouble being generous and playing devil's advocate because I simply can't see the argument you're making.
OK, I worded that very badly. I'm not using it because they're scarce. I mean to say:
The reason someone could say I'm "abusing" it, is because they're scarce.
They shouldn't be scarce, and they're not intended for just poor people.
To be clear, I'm not here for financial reasons. In fact, I would not object to paying more, if it meant putting more in the pot for poorer households to benefit from.
The reason someone could say I'm "abusing" it, is because they're scarce.
They shouldn't be scarce, and they're not intended for just poor people.
To be clear, I'm not here for financial reasons. In fact, I would not object to paying more, if it meant putting more in the pot for poorer households to benefit from.
If you're not there for financial reasons, then clearly you should not be benefiting from social housing. You are making it more scarce for people who actually need it, by holding onto it.
The tax your landlord will pay on their profits, once you move out to a market-priced property, will be adding to the pot for poorer households to benefit from.
The tax your landlord will pay on their profits, once you move out to a market-priced property, will be adding to the pot for poorer households to benefit from.
This move is well appreciated. Currently, I own a house in oudegracht, Utrecht. It is very terrible situation here. All the apartments in and around me are all the time rented out as airbnb. During peak of pandemic, it was pretty much a ghost town.
The housing prices have skyrocketed due to covid, but all these all-cash investor are jumping and swooping in the apartments, holding it for a while and passing it to the next person. Some of the people, even have to pay around 50k euros over the asking price to buy it.
Because of the rising prices, the annual property tax to be paid also increases dramatically. People blame the low interest rate, but based on what I am seeing and heard from other people, it is investors all over the globe investing in properties in Amsterdam, Utrecht, Rotterdam etc.
The housing prices have skyrocketed due to covid, but all these all-cash investor are jumping and swooping in the apartments, holding it for a while and passing it to the next person. Some of the people, even have to pay around 50k euros over the asking price to buy it.
Because of the rising prices, the annual property tax to be paid also increases dramatically. People blame the low interest rate, but based on what I am seeing and heard from other people, it is investors all over the globe investing in properties in Amsterdam, Utrecht, Rotterdam etc.
> All the apartments in and around me are all the time rented out as airbnb. During peak of pandemic, it was pretty much a ghost town.
What you mention around Airbnb shouldn't be addressed through a buy-to-let ban, but an airbnb or short-term rental ban, which already exists in various forms. If there's problems with enforcement, address that. The ghost-town you described happened regardless of airbnb but due to literal lockdown measures that affected everyone, in particular the local population, you don't see the effect anymore despite tourists still largely staying away.
> Because of the rising prices, the annual property tax to be paid also increases dramatically.
No that's not correct. Typically Dutch municipalities tax based on what they need. If they need 1 million, they'd charge 1% of 100 in property values, or 2% of 50 million in property values. Price increases don't translate into higher property taxes.
You can see a video of how Utrecht does it, on their own website: https://bghu.nl/belasting/ozb
In fact, in Utrecht property tax rates decreased by about 22% in the past 6 years, due to increasing home prices.
Of course there is inflation, in absolute terms the number is increasing. But what you're describing isn't happening. I own a home in Utrecht, too.
Many studies in the Netherlands have shown investors aren't the cause of the price increases, I don't think this policy will solve things. It'll just relieve some pressure on the buying market and put extra pressure on the rental market.
> People blame the low interest rate
Yes, these people are economists, including the Dutch Central Bank, the AFM, every bank, every professor, in countless studies. The effect is clear and obvious.
What you mention around Airbnb shouldn't be addressed through a buy-to-let ban, but an airbnb or short-term rental ban, which already exists in various forms. If there's problems with enforcement, address that. The ghost-town you described happened regardless of airbnb but due to literal lockdown measures that affected everyone, in particular the local population, you don't see the effect anymore despite tourists still largely staying away.
> Because of the rising prices, the annual property tax to be paid also increases dramatically.
No that's not correct. Typically Dutch municipalities tax based on what they need. If they need 1 million, they'd charge 1% of 100 in property values, or 2% of 50 million in property values. Price increases don't translate into higher property taxes.
You can see a video of how Utrecht does it, on their own website: https://bghu.nl/belasting/ozb
In fact, in Utrecht property tax rates decreased by about 22% in the past 6 years, due to increasing home prices.
Of course there is inflation, in absolute terms the number is increasing. But what you're describing isn't happening. I own a home in Utrecht, too.
Many studies in the Netherlands have shown investors aren't the cause of the price increases, I don't think this policy will solve things. It'll just relieve some pressure on the buying market and put extra pressure on the rental market.
> People blame the low interest rate
Yes, these people are economists, including the Dutch Central Bank, the AFM, every bank, every professor, in countless studies. The effect is clear and obvious.
> Airbnb shouldn't be addressed through a buy-to-let ban, but an airbnb or short-term rental ban, which already exists in various forms
Airbnb is probably paying off various government officials around the world to make sure the laws are friendly to them.
Airbnb is probably paying off various government officials around the world to make sure the laws are friendly to them.
Well, I'm sure this is true for every industry. Nonetheless, in the Netherlands the law is 30 days per year max, that law has been around for years, and penalties are heavy. The Amsterdam municipality is laserfocussed on enforcement (which is difficult) and has been making plenty of headway.
> People blame the low interest rate
it is the interest rate - because the price of property is related to the cost of money (aka, interest rate).
Investors are merely looking for returns, with as low risk as possible. When property is priced low compared to the rate, you must expect this to happen.
it is the interest rate - because the price of property is related to the cost of money (aka, interest rate).
Investors are merely looking for returns, with as low risk as possible. When property is priced low compared to the rate, you must expect this to happen.
>it is the interest rate - because the price of property is related to the cost of money (aka, interest rate).
You can manufacture more cars and houses as you get more money. It clearly is related to the fact that land yields a risk free return regardless of what you use to price it.
In that sense money and land is an NRA. A non reproducible asset. Low interest rates break the NRA property of money which is perfectly ok if inflation is also low. Rather than holding onto money unproductively they simply switch to holding land unproductively. The solution is to introduce a holding fee onto land.
You can manufacture more cars and houses as you get more money. It clearly is related to the fact that land yields a risk free return regardless of what you use to price it.
In that sense money and land is an NRA. A non reproducible asset. Low interest rates break the NRA property of money which is perfectly ok if inflation is also low. Rather than holding onto money unproductively they simply switch to holding land unproductively. The solution is to introduce a holding fee onto land.
It's not just the investors. It's literally everyone.
I saw a bus ad yesterday in NL that looked straight out of They Live - it just said "INVEST REAL ESTATE" with a website link on a blue blackground.
I may be biased because I moved recently to the Netherlands and looking to buy our first home and stop paying rent.
But, the house prices are crazy out here. I work in tech and my wife is an academic. We earn what is definitely above market average, and it looks like we cannot afford most houses we find in the area where we are renting now(well outside Amsterdam).
At this juncture, at least temporarily, investors who are looking to buy up properties and make money out of it need to be stopped by regulations. This is for the greater good. Investors can always find other avenues to invest. But, people need reasonable housing prices.
But, the house prices are crazy out here. I work in tech and my wife is an academic. We earn what is definitely above market average, and it looks like we cannot afford most houses we find in the area where we are renting now(well outside Amsterdam).
At this juncture, at least temporarily, investors who are looking to buy up properties and make money out of it need to be stopped by regulations. This is for the greater good. Investors can always find other avenues to invest. But, people need reasonable housing prices.
This is becoming a problem in farmlands too. Young farmers are unable to buy farmlands, they are forced to lease from huge landowners. It is zero risk investment for these big landowners. Farmers do all the work, put in all the investment like tools (except the land) - landowners simply collect rent. Some of these people own hundreds of thousands of acres (Bill Gates, for example).
This is an ugly situation. This is not sustainable. At some point, we'd have a few hundred super wealthy people/corporations owning much of the desirable land and property. Everyone else would become just a peasant/tenant living in tiny apartments working all our lives just so we can have a tiny roof over our heads. This isn't hyperbole - one look at BlackRock should give us an idea in the direction this problem is going.
This is an ugly situation. This is not sustainable. At some point, we'd have a few hundred super wealthy people/corporations owning much of the desirable land and property. Everyone else would become just a peasant/tenant living in tiny apartments working all our lives just so we can have a tiny roof over our heads. This isn't hyperbole - one look at BlackRock should give us an idea in the direction this problem is going.
This kind of system was sustained for thousands of years in many different cultures, so I wouldn't exactly call it unsustainable. I would very much call it ugly and undesirable though.
My point here is that there is no guarantee that this will be solved just because it's "unsustainable". I don't understand why people aren't literally protesting on the street; we did so in the 70s and 80s ("geen woning geen kroning") and the situation was a lot less bad back then.
My point here is that there is no guarantee that this will be solved just because it's "unsustainable". I don't understand why people aren't literally protesting on the street; we did so in the 70s and 80s ("geen woning geen kroning") and the situation was a lot less bad back then.
Oh, I know! We can give them the land for free, but instead we get to collect a tax on their produce. Of course they cannot leave this arrangement without immediately paying for all the land.
I think we can call these people serfs.
I think we can call these people serfs.
While buying the house in early 2019 I consulted Woz portal and saw that the price (of the house I was planning to buy) had increased 300% over ~8 year period. A constant lunch table discussion used to be how crazy housing prices were even back in 2018-19. So the market was already hot even before the pandemic, but now it's reached mania levels!
I'm in Wales and house prices in Amsterdam look incredibly low for better build quality and higher living standard.
The result of years of low interest rate policies.
Better late than never. The housing market in the Netherlands is currently terrible. I’ve “fled” the country for the next few years. Hoping that would be enough time for the market to get healthy again. It’s just insane that we made it this easy for people who were well off to begin with to profit. Just sold a house, the profit I got from buying and selling that house alone makes me nauseous. Makes me wonder why I work at all. Can imagine corporate investors are milking it for all its worth.
Is it better in neighboring countries?. There was a discussion [1] about controlled rent market few days ago, it seems that the problem is related to growth.
[1] https://www.bbc.com/news/business-58317555
[1] https://www.bbc.com/news/business-58317555
IANAE, but I'm guessing part of the problem is also that housing is not part of inflation (i.e. not in the indexation).
It is, but it is mixed in with housing that people do not want, such as due to location, size, quality, etc.
The US CPI figures have no resemblance to your expenses if you live in one of the desirable and booming regions of the US.
The US CPI figures have no resemblance to your expenses if you live in one of the desirable and booming regions of the US.
The Netherlands (where the article is about) is relatively small, so I'm wondering if the whole country has more or less the same "booming" factor (?)
How does housing affect inflation in that country?
How does housing affect inflation in that country?
I think EU citizens have the right to live anywhere in the EU, so while not exactly the same as the US due to language and cultural differences, it might still have a noticeable effect. But I am not well versed in the topic, so I would only be able to guess.
There is a better way - raise the real rate. Cheap loans along with endless printing has basically made fiat useless as a medium to store value, the only reason fiat exists now is as a medium to exchange goods/services. Here the Fed has been buying over 100B of mortgage based securities a month. This got to stop. For all the talks about
Wealth inequality, I don’t understand how politicians fail to understand this basic thing.
I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
I don't think it's an issue of inflation. Inflation has been super low for the past decade or more. Everything else is cheap, it's just housing that's expensive. It's a combination of scarcity and speculation leading to more artificial scarcity. Make it less attractive for speculators and build more houses.
Inflation is extremely high: https://www.aei.org/carpe-diem/chart-of-the-day-or-century/
Looks like inflation has spiked in the last few months in the US, but that's after a long period of fairly low inflation. Compared to the past century, it's not that extreme yet; the 1970s and 1980s had higher inflation[0]. And the high house prices are not something from just the past few months, so it's really not inflation that's causing it.
My personal experience is Netherland[1] where the period of low inflation still continues, and house prices have also been shooting up for quite some time. We sold our previous house for 25% more after 8 years, and our current house has increased 25% in value after only 4 years. And even before I bought my first house, I was dismayed at the ridiculous house prices and wanted to wait until the whole thing crashed. (It did crash shortly after we bought our first house in 2008, but even that barely hurt the value of our house.)
[0] https://tradingeconomics.com/united-states/inflation-cpi (click 'max' to see the full graph) [1] https://tradingeconomics.com/netherlands/inflation-cpi
My personal experience is Netherland[1] where the period of low inflation still continues, and house prices have also been shooting up for quite some time. We sold our previous house for 25% more after 8 years, and our current house has increased 25% in value after only 4 years. And even before I bought my first house, I was dismayed at the ridiculous house prices and wanted to wait until the whole thing crashed. (It did crash shortly after we bought our first house in 2008, but even that barely hurt the value of our house.)
[0] https://tradingeconomics.com/united-states/inflation-cpi (click 'max' to see the full graph) [1] https://tradingeconomics.com/netherlands/inflation-cpi
How do you take "inflation is extremely high" from that chart?
56% over 20 years is 2.25%ish per year.
56% over 20 years is 2.25%ish per year.
How is the CPI a useful measure of inflation if it ignores the things people actually have to spend money on like housing and healthcare?
It wouldn't be, if it did that. Fortunately it doesn't ignore those. In the US CPI calculation, housing has around 42% weight, medical care around 9%. Source: https://www.bls.gov/cpi/tables/relative-importance/2020.htm
I think this is only rent? Most people don’t want to rent their whole life in the US
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
It uses actual rents for renters and owner-equivalent rents for owners. This does not assume at all that people want to rent their whole life. (The main assumption it relies on is that owners do not systematically understate what they think their own house could be rented for.)
So as long as the interest rates stay extremely low then this hold true?
You don't pay for the house. You pay for the mortgage. The mortgage is accounted for in the CPI and man gets this tiring. The housing component of the CPI has always been 3% for decades. It's one of the few things dragging it up to 2%.
If you have a higher interest mortgage the value of the house goes down but you still have the same monthly payment.
If you have a higher interest mortgage the value of the house goes down but you still have the same monthly payment.
>There is a better way - raise the real rate.
Ok, you decreased monopoly rents but you also raised the cost of everything that isn't a monopoly. You will now pay more interest on your car. Companies pay more interest and pass the cost of interest onto you through more expensive products and services.
The truth is that you didn't even make housing cheaper. You still pay $1000 per month for 30 years. Higher interest rates just mean more of your money goes to the bank in the form of interest payments rather than into home equity.
>Cheap loans along with endless printing has basically made fiat useless as a medium to store value,
I don't understand this logic. Fiat currency is created by the promise that someone will work for you. If you never redeem that promise it is worthless. You cannot store labor the same way you can store gold. All saving money does is create room for investments today. If those investments never happened then you saved for naught. You denied yourself of the value of your money and yet you have the audacity to blame others for it.
>I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
What negative interest rates do is force you to face the fact that you are not utilizing the promise and that money, just like grain decays over time. You are letting people sit unemployed unable to live up to their potential.
What "fucked up" an entire generation is the utilization of money as a time machine. Let's imagine a simple money system. $1 = 1 pound of grain. The grain standard. Grain decays over time. Therefore $1 appreciates exactly at the rate at which grain decays. The farmer storing grain has to pay the maintenance cost of holding onto it while the person with the money has none of the costs. Everyone will start hoarding money while they get to watch the real world decay. If you put a holding fee onto money that matches the decay rate of grain then people will be forced to spend their money on something that is more durable than grain like giant pyramids that survived for 4000 years.
Ok, you decreased monopoly rents but you also raised the cost of everything that isn't a monopoly. You will now pay more interest on your car. Companies pay more interest and pass the cost of interest onto you through more expensive products and services.
The truth is that you didn't even make housing cheaper. You still pay $1000 per month for 30 years. Higher interest rates just mean more of your money goes to the bank in the form of interest payments rather than into home equity.
>Cheap loans along with endless printing has basically made fiat useless as a medium to store value,
I don't understand this logic. Fiat currency is created by the promise that someone will work for you. If you never redeem that promise it is worthless. You cannot store labor the same way you can store gold. All saving money does is create room for investments today. If those investments never happened then you saved for naught. You denied yourself of the value of your money and yet you have the audacity to blame others for it.
>I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
What negative interest rates do is force you to face the fact that you are not utilizing the promise and that money, just like grain decays over time. You are letting people sit unemployed unable to live up to their potential.
What "fucked up" an entire generation is the utilization of money as a time machine. Let's imagine a simple money system. $1 = 1 pound of grain. The grain standard. Grain decays over time. Therefore $1 appreciates exactly at the rate at which grain decays. The farmer storing grain has to pay the maintenance cost of holding onto it while the person with the money has none of the costs. Everyone will start hoarding money while they get to watch the real world decay. If you put a holding fee onto money that matches the decay rate of grain then people will be forced to spend their money on something that is more durable than grain like giant pyramids that survived for 4000 years.
In The Netherlands I don’t think this would make a big difference around the major cities as there is a huge housing shortage and this will stay the same at least for the next 10 years, probably more much longer.
Scarcity was always a problem. Even in 90s and early 00s there was a lot of posters about housing shortage. But prices we’re rather stable. In a healthy housing market, you expect the property values to not grow over real interest rate. Which was the case back then.
This would lead to a steep collapse of property prices and force new homeowners who have just scraped together enough for a deposit into negative equity. This would drive a lot of anger against it (all amplified by the media/ultrawealthy who would be furious too) even if it were the right thing to do long term.
The only time I could see this happening would be in the case the value of the dollar fell off a cliff due to externally triggered emergency.
The only time I could see this happening would be in the case the value of the dollar fell off a cliff due to externally triggered emergency.
Yeah this is the narrative that is always played every time there is a talk about even slightest increase in interest rate. When politicians and news media alike play this narrative this gives people signal that house prices can never go down. I know a couple who is one layoff away from defaulting their mortgage, but they bought a house with mortgage 60% of their income since they think housing prices can never go down.
Assuming you are able to afford your mortgage in the first place and want to live in the house for distant future, why is repricing in due to rate change a problem anyway?
Assuming you are able to afford your mortgage in the first place and want to live in the house for distant future, why is repricing in due to rate change a problem anyway?
Agreed. I've never understood this assumption that one is entitled to get something for nothing merely by virtue of owning a house. Investment is just another form of gambling dressed up in the garb of respectability..
The main problem which this won't solve is the lack of space. There is a little land in NL so you can't grow endlessly and new districts would also put additional burden on infrastructure. People want to live close to major transport connections and/or big cities. You just can't build more and faster without considering the whole picture.
The intervention is late, yet much needed. It's time to create some rules for the greedy bankers too, they have been inflating the housing bubble with massive amounts cheap debt for far too long. Can't find a decent property for under €500K on the Dutch market. And bear in mind not everyone has Tech salaries; you have teachers, nurses, drivers, etc. on ~ €20K - €25K per annum before taxes. They would be homeless without social housing or homes passed on through generations.
Dutch properties listed for €350K-€400k are sold for +€50K to +€100K OVER the asking price. To complete the property sale prepare to put another €15K-€20K on the table for various fees, taxes and middlemen. Unless you are a millionaire or be willing to go deep into debt for 30 years and obliterate most of your savings, sadly you have no chance at purchasing a home in the Netherlands.
A home is a basic human utility (shelter), not a pump and dump investment scheme. Making standard homes so expensive that most people cannot afford is completely wrong and goes against society. Property investors have many other options such as investing in new property development, hotels for students, the stock market, new businesses, Bitcoin, etc. Heck, it's time to diversify.
Dutch properties listed for €350K-€400k are sold for +€50K to +€100K OVER the asking price. To complete the property sale prepare to put another €15K-€20K on the table for various fees, taxes and middlemen. Unless you are a millionaire or be willing to go deep into debt for 30 years and obliterate most of your savings, sadly you have no chance at purchasing a home in the Netherlands.
A home is a basic human utility (shelter), not a pump and dump investment scheme. Making standard homes so expensive that most people cannot afford is completely wrong and goes against society. Property investors have many other options such as investing in new property development, hotels for students, the stock market, new businesses, Bitcoin, etc. Heck, it's time to diversify.
There are more efficient ways to achieve the same and get a bunch of other positive side effects in one go: Land Value Taxation. Henry George proposed it already in 1879 in his book "Progress and Poverty".
Real estate investors buying existing properties, without substantial capital investment into upgrades/renovations, are exactly the same as concert ticket scalpers. Their business is of little benefit to society.
Investors buying existing private properties and not replacing them with higher density housing is something I could support ban of. Ofc, there should be some limitations on pricing of new units offered.
So long as homes are considered an asset class governments are compelled to protect their value and help increase that value.
This is a small step to decoupling property from investing but I think a great start.
To add to the topic, in NL you, as an owner of a property, are obliged to report to municipality if your property is vacant for one year. This is to prevent squatting. Very recently U.S. investor Blackstone reported ~300 apartments at once in Amsterdam for being vacant. They did it only after it was found out that some of the properties were squatted. And according to different sources, the apartments were vacant for very long time, more than a year.
On top of that, the investors often buy social housing. After some refurbrishment they start renting it as a non-social one. Many people are upset by this behavior as well.
On top of that, the investors often buy social housing. After some refurbrishment they start renting it as a non-social one. Many people are upset by this behavior as well.
I think it’s interesting that we tend to believe that someone would actually report these things.
Then we get hit by these US (and other) foreign companies to whom morality is just a suggestion, and whom will happily do whatever makes them most money.
Now they’ve made literal millions out of these empty properties, and they’ll be given the benefit of the doubt, because that’s how we do things.
Then we get hit by these US (and other) foreign companies to whom morality is just a suggestion, and whom will happily do whatever makes them most money.
Now they’ve made literal millions out of these empty properties, and they’ll be given the benefit of the doubt, because that’s how we do things.
This is the only right way to deal with greed. Enough is enough.
Greed is innate to humans and you can't even take it away with communism, people will still find a way to collect and hoard.
The problem is the low interest rates from central banks flooding the economy with money.
That's not an excuse. Lots of undesirable traits are also innate like violence, tribalism, etc. Does that mean we give those a free pass?
Exactly. We've got laws to mitigate or redirect any harmful innate traits that we've got. Greed, like violence, is definitely among them.
>Exactly. We've got laws to mitigate or redirect any harmful innate traits that we've got. Greed, like violence, is definitely among them.
And what about envy? That's clearly a big problem among commenters in this thread.
And what about envy? That's clearly a big problem among commenters in this thread.
It's not. You're mistaking the will to live and prosper with envy. People are correctly identifying all across the world that centers of power and capital are objectively worsening their lives, and they are taking action against them in their own, perfectly justified self-interest. The difference between that desire and greed is that greed cannibalizes the existence of others to sustain its own existence. No one is confused. We're seeing a revolutionary period approaching that will be comparable to "The Enlightenment." Let's hope it happens because I think the unavoidable alternative is 1000 years of darkness, another longer, world dark-age.
I didn't claim it was an exhaustive list. I suppose you could include all of the classic "mortal sins", though I don't see the others as having quite as devastating social impact as greed and violence. Maybe envy or pride might relate to society's obsession with social media and celebrity worship? I don't think those are quite as easy to legislate without infringing on personal freedom of expression, though.
If you raise interest rates then people hoard money. How does that solve anything?
Some greed might be innate, but what we're seeing today with billionaires is not normal greed, it's extreme greed, something me (and many others) don't think is innate.
And where does "communism" come from? No one mentioned it here on HN nor in the article. People are so quick to label things, even if they are not even related.
In this case, Dutch people seems to had enough of expensive prices so now they are on the lookout for a solution. Just because this solution involves the government stepping in to adjust the market, doesn't mean that the Dutch government is suddenly "communist".
And where does "communism" come from? No one mentioned it here on HN nor in the article. People are so quick to label things, even if they are not even related.
In this case, Dutch people seems to had enough of expensive prices so now they are on the lookout for a solution. Just because this solution involves the government stepping in to adjust the market, doesn't mean that the Dutch government is suddenly "communist".
> what we're seeing today with billionaires is not normal greed, it's extreme greed
No, it's normal greed and, if anything, inequality is lower now than it has been in the past. What we have today is fat, comfortable people looking at billionaires and screaming greed because the billionaire has a yacht while they only have 3 cars and one massive house. Who's the greedy one here?
No, it's normal greed and, if anything, inequality is lower now than it has been in the past. What we have today is fat, comfortable people looking at billionaires and screaming greed because the billionaire has a yacht while they only have 3 cars and one massive house. Who's the greedy one here?
> What we have today is fat, comfortable people looking at billionaires and screaming greed because the billionaire has a yacht while they only have 3 cars and one massive house. Who's the greedy one here?
This is the weirdest straw man, isn't the entire point of the issue that no one can afford housing? What are you even talking about?
This is the weirdest straw man, isn't the entire point of the issue that no one can afford housing? What are you even talking about?
I was looking for data for inequality per country (https://en.m.wikipedia.org/wiki/List_of_countries_by_income_...).
What location and timeline are you thinking of for now being less inequal? Do you have a data source I could look into? Cheers
Edit: grammar
What location and timeline are you thinking of for now being less inequal? Do you have a data source I could look into? Cheers
Edit: grammar
Data of current inequality isn't very useful. I don't have any data, but I wasn't the one claiming things were more extreme now than they have been in the past. If I look at the UK I see even the poorest people have shelter, food and free access to healthcare. In the past the poorest people were literally starving and in very poor health while the richest lived in huge manor houses that would make even a billionaire blush today.
There are plenty of people starving in the UK. Food banks can't keep up with demand. There are also the "new homeless" who once had stable jobs but are now part of the gig economy. Some are out on the street but most are couch surfing somewhere.
> if anything, inequality is lower now than it has been in the past
So, sorry for rephrasing it, your claim is that the poorest have better conditions than before (I don‘t know if that is the case), not that inequality has decreased. It is an interesting point.
So, sorry for rephrasing it, your claim is that the poorest have better conditions than before (I don‘t know if that is the case), not that inequality has decreased. It is an interesting point.
Sadly, it is inculcated in modern capitalism that anything is permissible as long as "it is just business"
I don't think it is greed. Rather, money and real estate has become a status symbol. It's just as dumb as trucks and SUVs being a status symbol among the middle class.
> This is the only right way to deal with greed. Enough is enough.
How about dealing with envy? Seems you've sure got plenty of that.
How about dealing with envy? Seems you've sure got plenty of that.
Greedy? Not me. Always the other guy that is greedy.
The irony is there is such high probability with posting on this board you are part of the top 1% of the globe when it comes to wealth.
The irony is there is such high probability with posting on this board you are part of the top 1% of the globe when it comes to wealth.
> you are part of the top 1% of the globe when it comes to wealth.
So what, what do you want the person to do, go live in a hut?
How is that person greedy compared to people with multiple houses?
So what, what do you want the person to do, go live in a hut?
How is that person greedy compared to people with multiple houses?
>How is that person greedy compared to people with multiple houses?
They're greedy because they think the world owes them cheap housing just by virtue of being born. The person who owns multiple houses actually did some work to earn the money to pay for them, they're not the one eyeing other people's property with envy.
They're greedy because they think the world owes them cheap housing just by virtue of being born. The person who owns multiple houses actually did some work to earn the money to pay for them, they're not the one eyeing other people's property with envy.
> They're greedy because they think the world owes them cheap housing
People want affordable housing not cheap housing.
> The person who owns multiple houses actually did some work to earn the money to pay for them
So if I hide my income in tax havens and evade taxes or if someone uses their wealth from a foreign country which they got using shady methods and then use that money to buy multiple properties, is that ok in your books?
People want affordable housing not cheap housing.
> The person who owns multiple houses actually did some work to earn the money to pay for them
So if I hide my income in tax havens and evade taxes or if someone uses their wealth from a foreign country which they got using shady methods and then use that money to buy multiple properties, is that ok in your books?
The problem here is that, in general, you don’t get to own multiple houses by being a hard worker. You could be an extremely hard worker, but not make very much money. You could be very lazy and make loads of money. The reality is that the housing market is on a trajectory where most people cannot and will not be able to afford ownership, even for white collar jobs. Wages do not go up quickly for most folks either, so the cost of acquiring a house relative to your income continues to rise.
More specifically, say you enter society making $80k in a major city. You’re young, so this is normal. At this point in time, a house is not an option, because a mortgage would require $100k in savings. And if the housing market continues increasing like it has the past few years, that amount keeps going up. For most people, the rate that house prices go up is quicker than the rate they can save towards a down payment.
It’s important to note that a quickly accelerating housing market is EXTREMELY beneficial for investors. It creates a feedback loop which makes investments more common, which makes the prices go up further. Spending $400k this year and selling for $500k next year is an excellent investment opportunity.
Is it greedy to think that one deserves a home? Likely not. Is it greedy to make some extra money via property investment? Maybe sometimes, maybe not. The point isn’t that property investment is inherently bad, but that property investment is pricing most people out of the housing market.
As a hypothetical, would you like to live in a society where homes are not accessible for 90% of people? I personally do not want to live in a society where housing is extremely scarce. That’s a recipe for societal upheaval. If property investment is making the market spiral out of control, which it likely is, it benefits most people to curtail that problem.
More specifically, say you enter society making $80k in a major city. You’re young, so this is normal. At this point in time, a house is not an option, because a mortgage would require $100k in savings. And if the housing market continues increasing like it has the past few years, that amount keeps going up. For most people, the rate that house prices go up is quicker than the rate they can save towards a down payment.
It’s important to note that a quickly accelerating housing market is EXTREMELY beneficial for investors. It creates a feedback loop which makes investments more common, which makes the prices go up further. Spending $400k this year and selling for $500k next year is an excellent investment opportunity.
Is it greedy to think that one deserves a home? Likely not. Is it greedy to make some extra money via property investment? Maybe sometimes, maybe not. The point isn’t that property investment is inherently bad, but that property investment is pricing most people out of the housing market.
As a hypothetical, would you like to live in a society where homes are not accessible for 90% of people? I personally do not want to live in a society where housing is extremely scarce. That’s a recipe for societal upheaval. If property investment is making the market spiral out of control, which it likely is, it benefits most people to curtail that problem.
This is cart before horse stuff. As noticed by other commenters some people need to rent. I am blaming 'quantitative easing'. If the central bank buys a whole lot of assets where do other investors go?
I believe the Netherlands used to allow full tax write-off of the mortgage interest (dunno if they still do). That certainly is bound to heat up the market.
That’s not a full write off and it’s only for a mortgage on a property you reside in. BTW many countries in the EU allow you to write off interest from loans even from credit cards but it didn’t cause an inflation of personal credit line or increased utilization.
The line of credit is not a physical, limited-availability asset however (and not something among basic people needs).
This is still in place for PPOR. Does not apply for investment properties AFAIK.
There are a few other cases where it applies as well, but you're right that it doesn't apply to investment properties.
Also, it's no longer always a full write off, it's a write off at a capped rate. Those with low incomes have a full write off, those with high incomes see a more limited effect.
Also, it's no longer always a full write off, it's a write off at a capped rate. Those with low incomes have a full write off, those with high incomes see a more limited effect.
Since most people would like themselves a PPOR that still has the effect of heating up the market.
Note to self : PPOR means 'Principal Place of Residence' here.
I am not sure 'full write-off' is the correct term.
It is tax deductable, so you are taxed less, typically max 50% of the interest sum.
It is tax deductable, so you are taxed less, typically max 50% of the interest sum.
That's the explanation I had from a local back in 2003. He said their whole interest part of the mortgage was eligible for tax rebate.
Still the case for PPOR, 30 years max, no interest-only mortages.
Not 50% anymore, the max deductible rate is now 43% and in 2023 it'll be 37% at which point there won't be anymore scheduled reductions. (but I'd be surprised if further reductions won't be announced the coming years).
It can be a misleading to say this means only 50% or 37% of your interest can be deducted. It could still be fully deducted. i.e. if your income is taxed at 37% rate, then the 37% rate of 2023 will mean your entire interest can be deducted from your income (100% interest deduction).
It means that at higher progressive tax rates for higher incomes, e.g. at 50%, only 37% of the 50% can be deducted.
It can be a misleading to say this means only 50% or 37% of your interest can be deducted. It could still be fully deducted. i.e. if your income is taxed at 37% rate, then the 37% rate of 2023 will mean your entire interest can be deducted from your income (100% interest deduction).
It means that at higher progressive tax rates for higher incomes, e.g. at 50%, only 37% of the 50% can be deducted.
I'm slightly annoyed with all the UK examples. This is about the Netherlands.
The Dutch housing bubble consists of 4 factors:
- interest rate on mortgages has been tax deductible
- new developments are limited due to environmental considerations
- it's the safest "on the books" wealth storage in all of Europe (it has been a good investment since the 16th century)
- the Netherlands outclasses it's direct neighbours in quality of life and urbanisation. It's #1 best location in the world to raise children. This leads to many many people wanting to move to the Netherlands. They are not coming for the jobs or our great personalities (sarcasm) they come for the nice living conditions, the great bicycle and public transit infrastructure. The great roads. The good education. The livability of our towns and cities. And we can't really scale it up further. It's all of the country already. You can be in the middle of nowhere in Frisia and jump on a lightrail or see a proper safe bike detour due to some new construction. From small suburbia to big inner cities. We really need Germany, Belgium and Denmark to step their game up. Release some of the pressure. (PS. Denmark is actually stepping up and will get there soon)
The Dutch housing bubble consists of 4 factors:
- interest rate on mortgages has been tax deductible
- new developments are limited due to environmental considerations
- it's the safest "on the books" wealth storage in all of Europe (it has been a good investment since the 16th century)
- the Netherlands outclasses it's direct neighbours in quality of life and urbanisation. It's #1 best location in the world to raise children. This leads to many many people wanting to move to the Netherlands. They are not coming for the jobs or our great personalities (sarcasm) they come for the nice living conditions, the great bicycle and public transit infrastructure. The great roads. The good education. The livability of our towns and cities. And we can't really scale it up further. It's all of the country already. You can be in the middle of nowhere in Frisia and jump on a lightrail or see a proper safe bike detour due to some new construction. From small suburbia to big inner cities. We really need Germany, Belgium and Denmark to step their game up. Release some of the pressure. (PS. Denmark is actually stepping up and will get there soon)
So investors buy the homes then rent them out? What’s the problem?
In some asian markets investors buy homes then sit on them unused for years. That’s a problem.
In some asian markets investors buy homes then sit on them unused for years. That’s a problem.
The problem is that it gets harder and harder for normal people to own anything (build up wealth), while building wealth is the best retirement startegy there is.
I myself, for example, live in a city where owning the place I live in is just barely getting in reach for me, although I am in the top 30% income bracket of my country. I therefore have to put my savings into the stock market, which is at an all time high. Maybe even a bubble.
It is frustrating to see any income gain that I make being absorbed by the housing market. I work hard while others get unspeakably rich just by owning stuff.
Simply put, the balance is off.
I myself, for example, live in a city where owning the place I live in is just barely getting in reach for me, although I am in the top 30% income bracket of my country. I therefore have to put my savings into the stock market, which is at an all time high. Maybe even a bubble.
It is frustrating to see any income gain that I make being absorbed by the housing market. I work hard while others get unspeakably rich just by owning stuff.
Simply put, the balance is off.
The problem is that it gets harder and harder for normal people to own anything ( build up wealth), while building wealth is the best retirement startegy there is.
This is the problem in a nutshell! It’s impossible for houses to continue to be great “wealth building” vehicles and for them be affordable. Politicians have prioritized the former and that’s how we got where we are.
If we want affordable housing for people to live in they can’t also be the universal investment vehicle. Those two objectives are in direct contradiction.
This is the problem in a nutshell! It’s impossible for houses to continue to be great “wealth building” vehicles and for them be affordable. Politicians have prioritized the former and that’s how we got where we are.
If we want affordable housing for people to live in they can’t also be the universal investment vehicle. Those two objectives are in direct contradiction.
Marx's analysis is as relevant today as ever. The expansion of capital seeking ever-increasing sources of surplus value has left most of us as nothing more than serfs subject to the whims of landlords.
It's not very difficult to criticize capitalism. Figuring out a solution is a much harder problem.
I've often wondered, with enough knowledge to actually know, what would happen if renting housing was made illegal. I imagine prices would drop precipitously, maybe to a point where everyone can buy?
>The problem is that it gets harder and harder for normal people to own anything
One of the reasons is that people insist on living and working in some of the wealthiest and most expensive cities in the world.
I live a cheap town and my commute to work in the 2nd biggest city in my country is just 25 minutes.
One of the reasons is that people insist on living and working in some of the wealthiest and most expensive cities in the world.
I live a cheap town and my commute to work in the 2nd biggest city in my country is just 25 minutes.
Mainly that's because that's where the jobs are. (Remote isn't a 100% solution, either.)
The jobs are where the international investors are and they prefer big cities over small unknown towns.
Perhaps people’s perception of the risk of living in a smaller town is sufficient to merit the risks of higher land prices in some of the wealthiest and most expensive cities in the worlds. Namely the risk of losing your source of income in a small town and the increased probability of higher income/access to opportunities in major cities.
Of course, it is a pendulum, and it is possible people’s perception swings too far towards the small town and the big city and back and forth.
Of course, it is a pendulum, and it is possible people’s perception swings too far towards the small town and the big city and back and forth.
You are assuming that it is possible to live cheaply within 25 minutes of a big city in The Netherlands. That's not the case.
But the Netherlands is small enough that the unaffordable prices in the big cities has pushed most people to the rest of the country basically increasing prices everywhere.
> The problem is that it gets harder and harder for normal people to own anything (build up wealth),
In the US, it is easier than ever. Open a free account online at a number of brokerages, and buy some broad market low cost equity index ETF.
The problem is government subsidies for real estate. Get rid of federal taxpayer guaranteed mortgages (Fannie Mae, Freddie Mac, ginnie mae). Get rid of 1031 exchanges. Let the markets set the interest rate and do its own risk calculations.
See similar price distortions due to federal taxpayer guaranteed student loans.
All of this is unlikely, however, since the US and many other societies have baked in burgeoning economic growth for decades to come in their previous decades’ spending. Therefore, to avoid defaulting on these assumptions, the societies will keep inflating currency to keep the ruse going as long as possible.
In the US, it is easier than ever. Open a free account online at a number of brokerages, and buy some broad market low cost equity index ETF.
The problem is government subsidies for real estate. Get rid of federal taxpayer guaranteed mortgages (Fannie Mae, Freddie Mac, ginnie mae). Get rid of 1031 exchanges. Let the markets set the interest rate and do its own risk calculations.
See similar price distortions due to federal taxpayer guaranteed student loans.
All of this is unlikely, however, since the US and many other societies have baked in burgeoning economic growth for decades to come in their previous decades’ spending. Therefore, to avoid defaulting on these assumptions, the societies will keep inflating currency to keep the ruse going as long as possible.
Even my low-risk Vanguard ETFs have gone up like 30% in a year. That seems insane to me.
I would expect that. Politically, everyone is aligned with ensuring equity prices go up. And so everything possible will be done to accomplish it.
I am 100% equities for any funds I do not need in the next few years. Index fund ETFs are the real TIPS, Treasury Inflation-Protected Securities.
I am 100% equities for any funds I do not need in the next few years. Index fund ETFs are the real TIPS, Treasury Inflation-Protected Securities.
It's just that most people would prefer owning a house over owning stocks.
Because when the economy tanks and you lose your job, you have to sell your stocks at the low point to make rent. When you own your house, losing your job still sucks, but at least you still have a home. Thats also the reason why the low interest rates, although nice for homebuyers, also aren't a great levy of the situation: I have to pay back the credit for my house over 40 years, I have the same risk of losing everything in a downturn. You can't make the credit payment and are forced to sell your home at the market low.
Maybe I'm just traumatized. When I left school, 2008 economy crash was in full swing, two years after leaving Uni and in my first job, Corona happened.
On the topic of price distortions through government influenced loan rates: I think what you say makes sense.
Because when the economy tanks and you lose your job, you have to sell your stocks at the low point to make rent. When you own your house, losing your job still sucks, but at least you still have a home. Thats also the reason why the low interest rates, although nice for homebuyers, also aren't a great levy of the situation: I have to pay back the credit for my house over 40 years, I have the same risk of losing everything in a downturn. You can't make the credit payment and are forced to sell your home at the market low.
Maybe I'm just traumatized. When I left school, 2008 economy crash was in full swing, two years after leaving Uni and in my first job, Corona happened.
On the topic of price distortions through government influenced loan rates: I think what you say makes sense.
I do not understand your comment, as it started off sounding like there was a downside of renting vs owning, but then later on in the paragraph, you say that the risks of not being able to pay rent and not being able to pay a mortgage result in the same consequences during an economic downturn.
> Because when the economy tanks and you lose your job, you have to sell your stocks at the low point to make rent.
You should have an emergency fund so that you do not have to sell at the low point. I try to keep at least 24 months of expenses.
In the US, the government also offers a federal taxpayer subsidy in the form of lending people money with no money down or 5% down or some ridiculous scheme advertised as helping lower income people. On the contrary, this simply increases home prices and over leverages them since they will barely make monthly payments and any hiccup will derail them.
> Because when the economy tanks and you lose your job, you have to sell your stocks at the low point to make rent.
You should have an emergency fund so that you do not have to sell at the low point. I try to keep at least 24 months of expenses.
In the US, the government also offers a federal taxpayer subsidy in the form of lending people money with no money down or 5% down or some ridiculous scheme advertised as helping lower income people. On the contrary, this simply increases home prices and over leverages them since they will barely make monthly payments and any hiccup will derail them.
I do think renting has a downside compared to owning, but that due to the high prices and resulting very long timespans of paying back credits, buying is getting riskier.
Owning has lower risk than renting, but you have to buy to own and when you can't buy outright, then there is a phase where you are still exposed to a risk of losing your home.
And keeping 24 months of expense is a good idea, but if I want to buy a house, I want to put down as much as possible. 24 months of expenses is about 80% of my savings. And the majority of people do not have any kind of savings at all.
Owning has lower risk than renting, but you have to buy to own and when you can't buy outright, then there is a phase where you are still exposed to a risk of losing your home.
And keeping 24 months of expense is a good idea, but if I want to buy a house, I want to put down as much as possible. 24 months of expenses is about 80% of my savings. And the majority of people do not have any kind of savings at all.
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A lot of these investors are 50+ year olds who've benefited from tremendous unearned wealth from their primary residence.
When you own outright your main house and have paid effectively no rent or mortgage payments for decades, that surplus income makes buying a second investment property, even at today's prices, relatively easy. The extra money and demand entering the market pushes prices up.
Then the renting tenants have to pay an ever increasing share of their income in rent. They never build up capital, and so can never afford to buy anywhere.
This is a societal problem - home ownership means stability (to have children), commitment to an area, a willingness to invest time into improving it. When you can be cast on to the streets with a few months notice at your landlords whim, you have none of that.
When you own outright your main house and have paid effectively no rent or mortgage payments for decades, that surplus income makes buying a second investment property, even at today's prices, relatively easy. The extra money and demand entering the market pushes prices up.
Then the renting tenants have to pay an ever increasing share of their income in rent. They never build up capital, and so can never afford to buy anywhere.
This is a societal problem - home ownership means stability (to have children), commitment to an area, a willingness to invest time into improving it. When you can be cast on to the streets with a few months notice at your landlords whim, you have none of that.
It affects the housing market very negatively. These are houses that could've been bought by families and couples and so on. Instead of being available for purchase, the same people have now have to rent instead of buy.
House prices rise, rent increases, common folk are struggling, investors are getting rich without doing anything.
It's just meh all over.
House prices rise, rent increases, common folk are struggling, investors are getting rich without doing anything.
It's just meh all over.
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If that means middle income families or starters are not able to buy those houses, and the investors driving the prices up. Then yes, it’s a problem.
Why should middle income families be able to buy property in some of the wealthiest and most expensive cities in the world?
There is suburbs for that.
There is suburbs for that.
bsksi(1)
The problem of inflated house prices extends to the suburbs and beyond
The fact that those cities are so expensive is exactly the problem. Those cities are healthier if they have a healthy mix of different population groups. I live in Amsterdam and would hate to see it become a rich people's ghetto, though it's definitely at risk of that happening. Maybe it already is.
Where are the people who work in those cities supposed to live? Are they expected to commute an hour a day, diminishing their earning potential and increasing their expenses? People in the wealthiest cities also tend to have access to more resources, due to the concentration and diversity of the population. Denying low and middle income families access also diminishes their potential, while diminishing the potential of cities through the reduction of diversity.
At best, this sounds an argument to hold people back. At worse, it sound like an argument to push people down.
At best, this sounds an argument to hold people back. At worse, it sound like an argument to push people down.
The problem is that in a globalized world, dutch homes are more attractive than, say, homes in Cairo or Sao Paulo. Investors moving money in means that home prices are no longer correlated with the local economy. A salary is no longer what determine the rent or the mortgage but rather "global" appeal to that place.
The problem is that these investors have raised rents nationally to a point where there is no affordable housing outside of social housing (8-15+ year wait lists). And this happened in a very short time period. If I'd want a 60-80m2 apartment in the city I currently live, I'd have to pay 1000-1200+ Euro for that; three to four years ago, that would have been half. Just over the border in Germany the same apartment goes for 350-500 Euros (NRW to be specific). The housing market here feels beyond crazy. Real estate prices themselves are also exploding +10%~ month over month
Is that because Germany had banned property investment or because supply keeps up with demand in Germany?
Germany has much better tenant and rental market protection. Real estate prices are rising rapidly, but supply does seem to keep up with demand when it comes down to renting. Population density in Germany also is only half that of the Netherlands (240 vs 508 per km2), so that also helps. If you're priced out somewhere, you always have the option to move somewhere else. In the Netherlands you don't have much of a option right now when it comes down to renting (and mostly buying as well).
It sold social housing and stopped building more of it. If you had asked about real estate 10 years ago you'd hear about how Germany solved the housing problem.
The real problem is that governments around the developed world gave up on building affordable social housing since the 70s.
AirBnB investors just highlight the symptoms.
AirBnB investors just highlight the symptoms.
From my experience, the size and type of investor seem to be a factor. I have rented my entire adult life since it has some advantages (notably mobility), yet have always rented from homeowners or small-time investors. They tend to place more emphasis upon keeping their units rented and keeping good renters. Except for moving, I have only seen my rent increase once. It was a small increase and I lived in that place for many years.
Contrast that to people who have lived in places with large property managers. The rent increase is automatic, even with better renters than I. I have heard substantiated stories of rent doubling. Now those renters may have been bad apples and the property manager may have been using it as a tool for eviction, but that is still a problem. It is a problem since it is used a means to bypass tenant protections. Those protections are necessary to provide housing stability.
My apologies for the rant. In principle, I have nothing against investment. That said: the excessive greed of some investors, the ones that effectively push people down or out to achieve ... well, I don't know what some people are trying to achieve beyond a certain point ... is turning me away from that principle.
Contrast that to people who have lived in places with large property managers. The rent increase is automatic, even with better renters than I. I have heard substantiated stories of rent doubling. Now those renters may have been bad apples and the property manager may have been using it as a tool for eviction, but that is still a problem. It is a problem since it is used a means to bypass tenant protections. Those protections are necessary to provide housing stability.
My apologies for the rant. In principle, I have nothing against investment. That said: the excessive greed of some investors, the ones that effectively push people down or out to achieve ... well, I don't know what some people are trying to achieve beyond a certain point ... is turning me away from that principle.
Market investment, ie. where little new value is added, is gambling dressed up to look respectable. It's all about getting something for nothing which is the root cause of all our economic ills.
I try to be careful with how I think about these things, so I don't go off the deep end. In my mind, investment is the adding of value while trading does not add value. Both are gambling on the outcome, but investment tries to direct the outcome while trading tries to predict the outcome.
In the context of housing, investment may look like a renovation to improve desirability or replacing a small number of units with a larger number of units. In contrast, trading would involve maintaining the status quo in hopes that the desirability of a neighbourhood or relative scarcity would increase the value of a property.
That being said, I don't know how you would create a system of investment that doesn't create an environment for speculative trading. In would be difficult to encourage the former without a means of selling off the investment at a later date. Reducing the frequency of trading wouldn't help in the case of housing since those are long term investments to start with.
In the context of housing, investment may look like a renovation to improve desirability or replacing a small number of units with a larger number of units. In contrast, trading would involve maintaining the status quo in hopes that the desirability of a neighbourhood or relative scarcity would increase the value of a property.
That being said, I don't know how you would create a system of investment that doesn't create an environment for speculative trading. In would be difficult to encourage the former without a means of selling off the investment at a later date. Reducing the frequency of trading wouldn't help in the case of housing since those are long term investments to start with.
>I don't know how you would create a system of investment that doesn't create an environment for speculative trading.
Remove the government subsidies and guarantees and improve price transparency.
Remove the government subsidies and guarantees and improve price transparency.
This is stupid.
It bans buying or renting. Our rental market is already very distorted because most rentals fall under regulations except for people just above modal incomes. That already leaves a gap for people not poor enough to be allowed regulated rent, and too poor to get an 700 a month mortgage, who are forced to rent at 900 a month.
If you want to hurt pure investors, tax un-lived in housing.
But really, we need to kill the mortgage tax credit for any new homes. That will reduce the value of land because it offers less tax benefits. At the same time, currently interest is low so it will barely effect new entrants. The key is to make houses worth a bit less. Homeowners are just going to have to suffer a slight dip after amazing gains for the last decades.
It bans buying or renting. Our rental market is already very distorted because most rentals fall under regulations except for people just above modal incomes. That already leaves a gap for people not poor enough to be allowed regulated rent, and too poor to get an 700 a month mortgage, who are forced to rent at 900 a month.
If you want to hurt pure investors, tax un-lived in housing.
But really, we need to kill the mortgage tax credit for any new homes. That will reduce the value of land because it offers less tax benefits. At the same time, currently interest is low so it will barely effect new entrants. The key is to make houses worth a bit less. Homeowners are just going to have to suffer a slight dip after amazing gains for the last decades.
Do I understand correctly that they want to kick out all the students from the cities?
When I was studying in Groningen I had to look for places to rent out of the city.
Some students were camping in tents in front of the campus.
Here is a photo from another city, Tilburg:
https://www.dutchnews.nl/wpcms/wp-content/uploads/2019/09/st...
Some academic staff were even taking them in due to shortage of places to rent.
I managed to rent a very nice place in Bedum, a village 13 km from the university campus, and I was commuting every day on bike.
When I was studying in Groningen I had to look for places to rent out of the city.
Some students were camping in tents in front of the campus.
Here is a photo from another city, Tilburg:
https://www.dutchnews.nl/wpcms/wp-content/uploads/2019/09/st...
Some academic staff were even taking them in due to shortage of places to rent.
I managed to rent a very nice place in Bedum, a village 13 km from the university campus, and I was commuting every day on bike.
The trend here in Trondheim (third-largest city in Norway with 200k residents, of these ca. 40k are students) is that a lot of houses and apartments are explicitly offered for sale with plans for conversion to student apartments.
Rents in the city have increased by 8.2% over the last 12 months, property prices by 20-25% over the last two years. The price per square meter to buy anything reasonable is above 6k Eur now. Salaries are, of course, not adjusted to compensate for this...
So I can understand and support this Dutch initiative, but of course universities and municipalities then have to ensure they provide an appropriate amount student accommodation. Since students are an important economic factor, this doesn't sound to be a too unreasonable demany to me.
The Norwegian government also tries a different approach - it tries to enable young people to buy property already in their twenties by funding special discounts on interest rates. Together with banning investors from the cities, this might also be a model for the Netherlands, which, like Norway, has quite a high rate of home ownership (69% NL vs. 81% NO). Some of my recent master students owned an apartment here and made a nice profit when they sold it this year and moved back to Oslo...
[1] https://www.statista.com/statistics/543453/house-owners-amon...
[2] https://tradingeconomics.com/netherlands/home-ownership-rate
Rents in the city have increased by 8.2% over the last 12 months, property prices by 20-25% over the last two years. The price per square meter to buy anything reasonable is above 6k Eur now. Salaries are, of course, not adjusted to compensate for this...
So I can understand and support this Dutch initiative, but of course universities and municipalities then have to ensure they provide an appropriate amount student accommodation. Since students are an important economic factor, this doesn't sound to be a too unreasonable demany to me.
The Norwegian government also tries a different approach - it tries to enable young people to buy property already in their twenties by funding special discounts on interest rates. Together with banning investors from the cities, this might also be a model for the Netherlands, which, like Norway, has quite a high rate of home ownership (69% NL vs. 81% NO). Some of my recent master students owned an apartment here and made a nice profit when they sold it this year and moved back to Oslo...
[1] https://www.statista.com/statistics/543453/house-owners-amon...
[2] https://tradingeconomics.com/netherlands/home-ownership-rate
Everyone is suggesting ineffective solutions with idiotic side effects. The proper way of solving this problem is to build a lot more homes. Otherwise you'll be creating a plan economy where bureaucrats are constantly scrambling to alleviate the side effects of their shuffling of deck-chairs on the sinking ship.
But of course, few cities want to do this. The biggest cities in Norway are particularly bad at not even attempting to solve this problem at the root.
Let's just say it loudly and proudly: If you're against allowing the free market to build as much as the demand indicates, you're for high housing costs and screw everyone who is negatively affected. This hypocritical virtue signalling has gotten really old.
But of course, few cities want to do this. The biggest cities in Norway are particularly bad at not even attempting to solve this problem at the root.
Let's just say it loudly and proudly: If you're against allowing the free market to build as much as the demand indicates, you're for high housing costs and screw everyone who is negatively affected. This hypocritical virtue signalling has gotten really old.
I can envision a scenario where both are true and result in short term (possibly on the order of decades) pain for locals. The supply of housing is not meeting the demand of local residents and the supply of “desirable” investments in stable societies is not met for global investors.
It is an arbitrage and inefficiency scenario created by the ability of capital to move easily around the world, but not people.
It is an arbitrage and inefficiency scenario created by the ability of capital to move easily around the world, but not people.
Do you have any examples where building more would have resulted in stabilizing or lowering housing prices? This is the classical suggestion but doesn't seem like there would be any supporting evidence of it actually working in practice.
Of course I want cities to build more. But I don't imagine it will ever actually lower the housing costs.
Of course I want cities to build more. But I don't imagine it will ever actually lower the housing costs.
Cities rarely try this out in practice. There are examples of smaller cities that manage to keep up - e.g. Kristiansand in Norway, which kept the real estate price development slightly negative during a decade when the rest of the country had a massive increase. I get the impression Copenhagen has also managed to build enough. Their bubble popped in 2006 AFAICT, with moderate development since then in spite of negative interest rates.
But for large cities, there seems to almost universally be democratic agreement that we won’t build a lot more right here.
You get the odd symbolic attempt. But I’m not talking about re-zoning the odd industrial park and rationing them out to the three developers that get things done in this town.
I’m talking about building 40 stories everywhere, where previously there were 8. Consistently allowing developers to build in front of their neighbors’ ocean view. Turning 50% of the beloved hills around the city into high-rise apartments. Stuff like this, to a degree proportional with demand. Annual price increase or decrease is the signal to steer by.
My point: If you support local democratic policy that will lead to an outcome every passing ECON101 student can predict -
Own it.
But for large cities, there seems to almost universally be democratic agreement that we won’t build a lot more right here.
You get the odd symbolic attempt. But I’m not talking about re-zoning the odd industrial park and rationing them out to the three developers that get things done in this town.
I’m talking about building 40 stories everywhere, where previously there were 8. Consistently allowing developers to build in front of their neighbors’ ocean view. Turning 50% of the beloved hills around the city into high-rise apartments. Stuff like this, to a degree proportional with demand. Annual price increase or decrease is the signal to steer by.
My point: If you support local democratic policy that will lead to an outcome every passing ECON101 student can predict -
Own it.
Even better - ban profit on property sales.
Person living in Groningen right now, as Dutch citizen here.
There aren't enough houses for students right now.
There aren't enough houses for students right now.
> Do I understand correctly that they want to kick out all the students from the cities?
Presumably not, unless those students are property investors.
Presumably not, unless those students are property investors.
I suppose the implied question is: who's going to rent to students if the landlords' investments get penalized for them not living there themselves. There's presumably too many students in these cities for all of them to find some family who have a spare room to rent.
Even if this action were to have unintended consequences, the question was "do they want to". No, they don't, obviously, not any more that the people who gave "go" to STS-51L wanted to kill seven astronauts. What they want to do is to get rid of predatory investors.
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There are some very hard limits to taking students in too. You don't want to be a student after the covid induced decline in demand is over. Especially not if you are not from here. The regulation exempt SSH will put you in a room with another student or two and charge you 800 or so.
The municipality can designate locations where these rules apply and they can designate if a location is intended for student housing.
I'm not seeing an issue that is directly exacerbated. There are simply more tools that can be (ab)used .
I'm not seeing an issue that is directly exacerbated. There are simply more tools that can be (ab)used .
You misunderstood. The only way to rent a place is to rent it from an investor. If investors are banned from the city, then students need to buy the house/room they live in. This is of course not feasible for the majority of students.
> The only way to rent a place is to rent it from an investor.
You mean in the Netherlands? Because I never had to do that in my country. I'm not aware of places where the only landlords are investors.
You mean in the Netherlands? Because I never had to do that in my country. I'm not aware of places where the only landlords are investors.
I think you are missing the point.
All landowners are investors. They bought the property to make money. That makes them an investor. Maybe not a coporation but an investor.
All landowners are investors. They bought the property to make money. That makes them an investor. Maybe not a coporation but an investor.
Surely the Dutch are not using your proposed definition, because that would make zero sense unless they wanted to turn the Netherlands into another Chernobyl exclusion zone. That seems unreasonable, so they must be using a different one.
It is the definition we use. This is just gonna create more kafka tier stuff for people to deal with, its not gonna end housing if Amsterdam decides it only wants multi millionaires with privately owned overly expensive houses in certain areas.
Lots of student and young people housing is owned by non-profits around here. My whole campus was non-profit.
Investor or parasite?
[deleted]
> investors won't be allowed to buy cheap and medium-priced homes and rent them out
So, who will be renting cheap and medium-priced homes?
There are already extremely severe shortages as exemplified by students camping in tents.
So, who will be renting cheap and medium-priced homes?
There are already extremely severe shortages as exemplified by students camping in tents.
People living in them? That's how it mostly works elsewhere. Also, it is not customary in the Netherlands for students to live in dorms?
Right, because that’s what every family dreams about: having a stranger living in their house. Also, if there was enough space in dorms for everyone there wouldn’t be those students camping in tents, as OP wrote.
There's no need for every family to sublet. Usually a small minority of residences house subletters.
I'm not quite sure how worsening the situation for everyone by property investors hoarding houses would make it better for students, either.
I'm not quite sure how worsening the situation for everyone by property investors hoarding houses would make it better for students, either.
Property investors are not "hoarding" houses. They buy them and then rent them out, thus increasing the supply. It is actually better for students this way: an investor that does not live in their property can rent out it whole. If a house can fit 5 people that means a living space for 5 students. If the house gets bought by a family, that family moves in, so 3 out of 5 spots are now occupied, leaving only 2 available for rent. I don't know, maybe that's the hidden goal of this policy: push the students out, and bring in more families.
> They buy them and then rent out, thus increasing the supply.
That doesn't increase supply. I'm really not sure how middlemen skimming money could increase supply since that should push the supply curve to the left.
> If the house gets bought by a family, that family moves in, so 3 out of 5 spots are now occupied, leaving only 2 available for rent.
And the family moved in from somewhere else, leaving you with three spots in that some other place plus two spots in the new place, so you have 5 places for students regardless. Not sure why you think this changes something.
The optimal solution is obviously to fix the dorm system. It's well organized, cheap, and space efficient - at least in my country, at about half the price of renting your own place. Surely my backwards country is not more capable than the Dutch in this respect.
That doesn't increase supply. I'm really not sure how middlemen skimming money could increase supply since that should push the supply curve to the left.
> If the house gets bought by a family, that family moves in, so 3 out of 5 spots are now occupied, leaving only 2 available for rent.
And the family moved in from somewhere else, leaving you with three spots in that some other place plus two spots in the new place, so you have 5 places for students regardless. Not sure why you think this changes something.
The optimal solution is obviously to fix the dorm system. It's well organized, cheap, and space efficient - at least in my country, at about half the price of renting your own place. Surely my backwards country is not more capable than the Dutch in this respect.
> And the family moved in from somewhere else, leaving you with three spots in that some other place plus two spots in the new place, so you have 5 places for students regardless. Not sure why you think this changes something.
Because that family might have moved from out of town, and students can't move to their old place that is too far from the university?
EDIT: I'm not sure that building more dorms is a good idea. My experience (although from totally different country) is that dorm rooms are the worst possible environment for learning. During my time in college there was a clear division: those who prioritized studying lived in the quiet rental apartments, those who prioritized socializing lived in the dorms :)
Because that family might have moved from out of town, and students can't move to their old place that is too far from the university?
EDIT: I'm not sure that building more dorms is a good idea. My experience (although from totally different country) is that dorm rooms are the worst possible environment for learning. During my time in college there was a clear division: those who prioritized studying lived in the quiet rental apartments, those who prioritized socializing lived in the dorms :)
> During my time in college there was a clear division: those who prioritized studying lived in the quiet rental apartments, those who prioritized socializing lived in the dorms :)
And I wonder who ended up better off :).
The longer I live, the more I realize that I made a mistake during my university years. I focused on learning where I should've been partying - because as it turns out, knowledge is the easy part. The hard part - and the important part - is building a network of friends and connections, which happens at parties, not in quiet rental apartments.
And I wonder who ended up better off :).
The longer I live, the more I realize that I made a mistake during my university years. I focused on learning where I should've been partying - because as it turns out, knowledge is the easy part. The hard part - and the important part - is building a network of friends and connections, which happens at parties, not in quiet rental apartments.
That's not a problem specifically for students, though. That's a problem for everyone when X people need to move to a city where there's Y<X capacity of housing.
> an investor that does not live in their property can rent out it whole
There's a flip side to this. An investor that does not live in their property doesn't care about the property as a place to live. So...
> If a house can fit 5 people that means a living space for 5 students.
But what actually happens these days is the house gets renovated to turn those 5 living spaces into 8 or 10. Students don't have any leverage on the market, so investors will densify houses over time, until they health and safety limits, and then some (the rents, of course, don't drop proportionally). Not enough students anymore? Fortunately there's AirBnB now. What about people who actually want to settle in the area? Nah, they're too needy, literally the least efficient bunch to extract money from.
Elsewhere in the thread, some people say that the problem is with people who want to settle in expensive, wealthy cities. But perhaps the main reason those cities are expensive is because of property investment? That is, all those high salaries cancel out with high rents. Get rid of high rents, salaries may drop, but so do costs of living, and the whole market settles at a more approachable and sustainable level.
There's a flip side to this. An investor that does not live in their property doesn't care about the property as a place to live. So...
> If a house can fit 5 people that means a living space for 5 students.
But what actually happens these days is the house gets renovated to turn those 5 living spaces into 8 or 10. Students don't have any leverage on the market, so investors will densify houses over time, until they health and safety limits, and then some (the rents, of course, don't drop proportionally). Not enough students anymore? Fortunately there's AirBnB now. What about people who actually want to settle in the area? Nah, they're too needy, literally the least efficient bunch to extract money from.
Elsewhere in the thread, some people say that the problem is with people who want to settle in expensive, wealthy cities. But perhaps the main reason those cities are expensive is because of property investment? That is, all those high salaries cancel out with high rents. Get rid of high rents, salaries may drop, but so do costs of living, and the whole market settles at a more approachable and sustainable level.
I know a girl who bought a house with a mortgage backed by her government-student-grant somewhere around 2006 iirc.
Additionally, If prices weren't so high there would be more students buying houses with their parents money.
None of that is to say I understand the market, it's history or future. But your take seems to be based on dogma and an oversimplified supply and demand model.
Additionally, If prices weren't so high there would be more students buying houses with their parents money.
None of that is to say I understand the market, it's history or future. But your take seems to be based on dogma and an oversimplified supply and demand model.
If there was enough rooms I could have rented a tiny room, like a Norwegian prison cell, from a student housing. But there was not enough of these rooms. And they were available only for one year. You had to vacate them after that.
Presumably the reason for why there isn't enough housing for students is related to why there isn't enough housing for everybody else.
The only way to make housing affordable is to end property investing.
New Zealand had a stock market crash in the ’80s which is frequently blamed for the aversion New Zealanders have to shares and the love of property investment.
We have a truely terrible housing stock (cold, damp and poorly maintained) and in the largest city, Auckland, the average house price is 20x the average wage.
People claim it’s untenable but the rise in values has been utterly relentless.
We have a truely terrible housing stock (cold, damp and poorly maintained) and in the largest city, Auckland, the average house price is 20x the average wage.
People claim it’s untenable but the rise in values has been utterly relentless.
When I lived in Dunedin a few years ago I was truly shocked at the state of the houses. I don't think I've ever seen a house in the Netherlands without central heating; but I've never seen a house with central heating in Dunedin, and Dunedin is quite a bit colder than the Netherlands. Isolation and even double glazing seems almost non-existent and wooden houses are the norm.
Don't get me wrong, I really loved living there, and I'd move back in an instant (but work visas are very hard at the moment), but Kiwi houses are the worst and many decades behind Europe.
Don't get me wrong, I really loved living there, and I'd move back in an instant (but work visas are very hard at the moment), but Kiwi houses are the worst and many decades behind Europe.
Nothing's going to put that cat back in the bag at this rate, short of a capital gains tax. But given 70% of our politicians are property investors themselves that won't ever be on the cards.
This whole sorry state of affairs makes me glad I left the country. That and how utterly abysmal IT salaries are.
This whole sorry state of affairs makes me glad I left the country. That and how utterly abysmal IT salaries are.
How do you buy a house then? Does the government just own all housing?
You just buy a house the usual ways and live in it. With cash or a mortgage.
If you live in it, it's not called "property investing".
"Property investing" refers to buying property to benefit from price speculation and use as a store of value, without actually using the property as a home. The property may sit there empty most or all of the time, or it may be rented out, with a combination of rent and price speculation being the owner's business plan. "Flipping" may be involved.
If you live in it, it's not called "property investing".
"Property investing" refers to buying property to benefit from price speculation and use as a store of value, without actually using the property as a home. The property may sit there empty most or all of the time, or it may be rented out, with a combination of rent and price speculation being the owner's business plan. "Flipping" may be involved.
Since houses don’t wear out or get used up, like clothes or food, and you can sell them when you’re done with them, they’re inherently an investment.
Sure, they're an investment too, but properties bought primarily to live in, with investment as a handy side effect, do not have the same effect on housing availability and affordability. Each such purchase reduces supply by 1, but also reduces demand by 1, and gives someone relative stability.
So purchasing to live in is not what "property investment" refers to in this context. It has a narrower meaning than "anything you could conceivably think of as an investment".
Aside, houses do in fact wear out, need regular repair, and eventually most get demolished because regular repair isn't good enough.
So purchasing to live in is not what "property investment" refers to in this context. It has a narrower meaning than "anything you could conceivably think of as an investment".
Aside, houses do in fact wear out, need regular repair, and eventually most get demolished because regular repair isn't good enough.
They do. It's the land that goes up in value.
Houses get more valuable the older they are. Most people don't want new houses.
That's true up to a point, but many houses decay beyond profitable repair eventually.
It depends how they are constructed and maintained.
In some cultures, houses are not expected to last a long time. Japanese houses famously depreciate with time and lose all their value after about 20 to 30 years.
In other cultures, houses that could last a long time don't get maintained if the people living in them are too poor to do so. Depending on the materials, and construction aspects like breathability, the house could still last a long time, or the materials could decay, crumble, become mouldy etc to the point that the only economical thing to do is tear the house down and rebuild.
Old houses (especially mansions) that are particularly historically interesting or very old may have preservation orders on them, limiting how you are permitted repair and rebuild. Sometimes this means repair will cost so much that only a rich person could afford to do it, and the repaired result would be worth less than the cost of that repair, so the transaction value of the property drops to a nominally low value (it's really negative value), but it's only available to someone who can afford to repair it. These properties tend to be inherited, and then the new owner can't afford to look after them.
It depends how they are constructed and maintained.
In some cultures, houses are not expected to last a long time. Japanese houses famously depreciate with time and lose all their value after about 20 to 30 years.
In other cultures, houses that could last a long time don't get maintained if the people living in them are too poor to do so. Depending on the materials, and construction aspects like breathability, the house could still last a long time, or the materials could decay, crumble, become mouldy etc to the point that the only economical thing to do is tear the house down and rebuild.
Old houses (especially mansions) that are particularly historically interesting or very old may have preservation orders on them, limiting how you are permitted repair and rebuild. Sometimes this means repair will cost so much that only a rich person could afford to do it, and the repaired result would be worth less than the cost of that repair, so the transaction value of the property drops to a nominally low value (it's really negative value), but it's only available to someone who can afford to repair it. These properties tend to be inherited, and then the new owner can't afford to look after them.
What defines property investing?
Why not a land value tax instead?
Why not a land value tax instead?
The issue of housing affordability comes up a lot on HN and the discussion often turns to a shortage of supply.
Often overlooked is the demand side of the supply and demand equation. From my perspective (mostly familiar with the NZ/AU markets), this is where the real problem lies.
Statistics New Zealand have collected data on the total number of private residences and the total number of households since the mid-90s. The difference between the two has almost doubled to around 7.5% nationally. There are substantially more empty or under-utilised residences in a time where every politician is telling us that building more houses will fix the problem. It won't. At best it will alleviate the problem.
Prosper Australia's Speculative Vacancies Report [0] (looking at water usage to determine under-utilised properties) suggests areas with high vacancy rates in Melbourne correlate with areas where capital gains (i.e. percentage price increases) are greatest. This is the opposite of what you would intuitively expect in a naive supply and demand equation - desirable areas have higher vacancy rates, even approaching 20% by their reckoning.
A study in the UK [1] using council data found that high property prices correlate strongly with what the study refers to as 'low use properties' (LUPs).
I wouldn't be at all surprised if the situation is the same in the Netherlands.
All of this suggests that demand for investment, not demand for housing is driving prices up. Zoning restrictions and other regulations do play a part, but I think in many cases their influence on the larger picture is overstated. Cheap loans, leverage, and favourable taxes make property a good investment.
The only solution is to make property investment less attractive. A land value tax - though politically difficult - seems to me to be a good option.
[0] https://www.prosper.org.au/wp-content/uploads/2019/04/Specul... [1] https://theodi.org/event/friday-lunchtime-lecture-empty-home...
Often overlooked is the demand side of the supply and demand equation. From my perspective (mostly familiar with the NZ/AU markets), this is where the real problem lies.
Statistics New Zealand have collected data on the total number of private residences and the total number of households since the mid-90s. The difference between the two has almost doubled to around 7.5% nationally. There are substantially more empty or under-utilised residences in a time where every politician is telling us that building more houses will fix the problem. It won't. At best it will alleviate the problem.
Prosper Australia's Speculative Vacancies Report [0] (looking at water usage to determine under-utilised properties) suggests areas with high vacancy rates in Melbourne correlate with areas where capital gains (i.e. percentage price increases) are greatest. This is the opposite of what you would intuitively expect in a naive supply and demand equation - desirable areas have higher vacancy rates, even approaching 20% by their reckoning.
A study in the UK [1] using council data found that high property prices correlate strongly with what the study refers to as 'low use properties' (LUPs).
I wouldn't be at all surprised if the situation is the same in the Netherlands.
All of this suggests that demand for investment, not demand for housing is driving prices up. Zoning restrictions and other regulations do play a part, but I think in many cases their influence on the larger picture is overstated. Cheap loans, leverage, and favourable taxes make property a good investment.
The only solution is to make property investment less attractive. A land value tax - though politically difficult - seems to me to be a good option.
[0] https://www.prosper.org.au/wp-content/uploads/2019/04/Specul... [1] https://theodi.org/event/friday-lunchtime-lecture-empty-home...
I’m reminded of behavioral studies showing that other primates have an instinctive concept of “fair” and will choose against cooperation if a deal seems unfair to them. I think this was covered in Freakonomics.
How about making a civil law where anybody can sue the owner of a home if it’s not occupied in a way that benefits the community around the home - say with a $10,000 plus court fees and 10% of any residual income minimum for anyone in the community who sues and wins?
How about making a civil law where anybody can sue the owner of a home if it’s not occupied in a way that benefits the community around the home - say with a $10,000 plus court fees and 10% of any residual income minimum for anyone in the community who sues and wins?
Then do other citizens have the right to sue the passer of this law for the resulting shortage of rental properties that this incentivises?
Perhaps relevant to this discussion. Another article on the same website from 7 days ago.
https://nltimes.nl/2021/08/29/us-investor-blackstone-accused...
Cant help but think, may be this is some form of insider trading by the wealthy - buy up apartments before such a regulation comes into place?
https://nltimes.nl/2021/08/29/us-investor-blackstone-accused...
Cant help but think, may be this is some form of insider trading by the wealthy - buy up apartments before such a regulation comes into place?
I think I mostly agree with this idea, but while removing pure investors from the market may offer some (or significant) help, however it still does not solve the mismatch between supply and demand. I think the removal of investors will lower the demand, but I think the mismatch will still exist in many places. And proposing solutions for that is essential, i.e. either building more or making it easier to work remotely etc.
What exactly does it mean that investors are driving up prices? As far as I know an investor gets two things by owning a house: a stream of future rent payments, and an appreciating asset. We can easily calculate the present value of the future rent payments. It would be a weird and obviously temporary condition if homes were selling for less than this. A market in disequilibrium. Is that the theory here? The healthier housing market we had in the past was homes priced at less than the NPV of their rents?
Maybe the investors are simply irrational and are overpaying for these properties? Hoping for greater fools? This seems like great news. Everyone who owns a property should sell it to one of these exuberant investors, enjoy the hefty profit, and rent (perhaps from the same person, without even moving house) while waiting for the crash. If this is our contention then rents are reasonable and people who simply want to be housed should just pay them.
Or maybe the market has always been in equilibrium and the investors have always been rational, but now the NPV is rising. It could do this for two reasons: the rents going up, or the discount rates going down. It seems plausible that both of those things are happening. The unstoppable force of urbanization meets the immovable object of NIMBYism; urban rents rise. Low interest rates reduce the discount rate. Although stock market returns have been incredible, so I'm less sure about this part. In any case, maybe what we're looking at is new, higher NPVs and we're hoping to keep the housing market in disequilibrium to prevent prices from catching up to that NPV?
I guess the final paragraph seems the most likely. And, well, good luck. When there's a systematically under-priced asset, people are going to find a way, rules or not. It would seem a lot more effective and sustainable to address the drivers of the rising fundamental value.
Maybe the investors are simply irrational and are overpaying for these properties? Hoping for greater fools? This seems like great news. Everyone who owns a property should sell it to one of these exuberant investors, enjoy the hefty profit, and rent (perhaps from the same person, without even moving house) while waiting for the crash. If this is our contention then rents are reasonable and people who simply want to be housed should just pay them.
Or maybe the market has always been in equilibrium and the investors have always been rational, but now the NPV is rising. It could do this for two reasons: the rents going up, or the discount rates going down. It seems plausible that both of those things are happening. The unstoppable force of urbanization meets the immovable object of NIMBYism; urban rents rise. Low interest rates reduce the discount rate. Although stock market returns have been incredible, so I'm less sure about this part. In any case, maybe what we're looking at is new, higher NPVs and we're hoping to keep the housing market in disequilibrium to prevent prices from catching up to that NPV?
I guess the final paragraph seems the most likely. And, well, good luck. When there's a systematically under-priced asset, people are going to find a way, rules or not. It would seem a lot more effective and sustainable to address the drivers of the rising fundamental value.
Dutch cities are easily the best-planned cities in the world. The channel "Not Just Bikes" [1] goes fairly in-depth as to why. I think I'll trust that the Dutch city planners know what they're doing in this instance.
[1]: https://youtube.com/c/NotJustBikes
[1]: https://youtube.com/c/NotJustBikes
I wonder if things will turn around on this channel now covid lockdowns are stopping. I have never found living in a city center in the Netherlands quiet before the lockdowns, and don't find it very quiet now anymore either.
There is also a law in the works called "Prince Bernhards tax", our Prince owns a lot of expensive property in Amsterdam.
600 of them ...He says its for his pension.
https://www.stolker.nl/portfolio/items/prince-bernhard-jr/
I have thought about San Francisco. It really does feel like this whole city is empty. No stores stay in business, no one seems to be walking around these neighborhoods. I have considered if you can fly around with a plane at night and use something like heat vision to determine who is home?Because I think the stats are just not correct for SF
San Francisco has enough empty homes to house every homeless person in SF many times over. And there are a lot of homeless in SF, so that's saying something.
And at the rate a certain subset of homeless destroy property, in a couple years none of those empty homes would be liveable.
I've been looking at buying a bigger home than the current one I own. It's near impossible as prices keep on going up. Very disapppinted that cities have to arrange this - it means that some cities won't yet introduce anything.
I can already see investors swooping into those markets without the ban... i.e. Haarlem where I live will be among them.
I can already see investors swooping into those markets without the ban... i.e. Haarlem where I live will be among them.
We'd need to look at demand versus supply, including new builds before we can point the finger at "investors", which may be convenient but not necessarily useful.
Ultimately, market forces are what they are. If demand exceeds supply then some people will always miss out.
There is also the problem of the amount of liquidity available. Since 2008 and even more since Covid mountains of cash have been created at zero interest rate and that partly explains assets' price inflation.
Let's also not forget that many people cannot afford to buy, and don't want to for whatever reason, so decimating the private letting sector is not great, either, and will only cause rents to skyrocket.
Ultimately, market forces are what they are. If demand exceeds supply then some people will always miss out.
There is also the problem of the amount of liquidity available. Since 2008 and even more since Covid mountains of cash have been created at zero interest rate and that partly explains assets' price inflation.
Let's also not forget that many people cannot afford to buy, and don't want to for whatever reason, so decimating the private letting sector is not great, either, and will only cause rents to skyrocket.
Rents have already skyrocketed while the private residential letting sector is thriving.
It's not clear at all that changing the market forces to increase access to ownership by occupiers would lead to increasing rents, even with reduced supply of rentable properties.
At the moment, a lot of tenants would rather buy if they could, and are paying the same or more in rent than they would pay on an equivalent mortgage, plus rents are rising faster than a mortgage would if they had one. Rents are also rising faster than their salaries. So they would gain location stability and financial stability by owning, but they can't get a mortgage. Mortgages, like anything in a competitive market, are preferentially offered to the best-looking customers, and property speculators are better-looking than ordinary working folks struggling to make ends meet on their current and rising rent.
If those people could buy properties like the ones they are currently renting, rentable supply would go down. But demand would also go down by the same amount, and mostly from those competing to pay the higher end of rents currently. I think this would reduce average asking rents for the remaining tenants.
It's not clear at all that changing the market forces to increase access to ownership by occupiers would lead to increasing rents, even with reduced supply of rentable properties.
At the moment, a lot of tenants would rather buy if they could, and are paying the same or more in rent than they would pay on an equivalent mortgage, plus rents are rising faster than a mortgage would if they had one. Rents are also rising faster than their salaries. So they would gain location stability and financial stability by owning, but they can't get a mortgage. Mortgages, like anything in a competitive market, are preferentially offered to the best-looking customers, and property speculators are better-looking than ordinary working folks struggling to make ends meet on their current and rising rent.
If those people could buy properties like the ones they are currently renting, rentable supply would go down. But demand would also go down by the same amount, and mostly from those competing to pay the higher end of rents currently. I think this would reduce average asking rents for the remaining tenants.
The proposal is to ban investors from buying more properties, it is not to increase access to ownership. If anything the effect is more likely to reduce supply than to increase it.
Those who are already able to buy may benefit, but that's about it.
Again, a big part of the problem is also the mountain of free money in the market.
Those who are already able to buy may benefit, but that's about it.
Again, a big part of the problem is also the mountain of free money in the market.
Good. I went to Prague recently (after 10 years) to discover that the entire city centre with all of it's businesses is now owned by chinese people. A 500ml water costs 10 euros and everything seems different, designed to just milk the cash from tourists. Had a much better experience 10+ years ago and made quite a few local friends.
That's a rather extreme response. I don't know what the markets are like in the Netherlands, but I can't imagine the dynamics are much different from other regions where this sort of issue exists. That is, it's a combination of NIMBYism or other supply restricting phenomena and a surplus of investors from outside these communities with the means to take advantage.
In my area on the Peninsula in the bay area, many years easily 25% of the available real estate stock is purchased by foreign investors. Forbidding all investors (local or foreign) from buying real estate to lease isn't going to solve the bigger problem: a lack of supply. It may help lower home prices into a range of affordability for locals (investors and primary residence seekers) substantially--which could be a good thing.
In my area on the Peninsula in the bay area, many years easily 25% of the available real estate stock is purchased by foreign investors. Forbidding all investors (local or foreign) from buying real estate to lease isn't going to solve the bigger problem: a lack of supply. It may help lower home prices into a range of affordability for locals (investors and primary residence seekers) substantially--which could be a good thing.
The spirit of the idea makes sense but maybe not the implementation. Homes should be occupied. I don't think a ban is necessarily the right approach. Have a high vacancy tax.
The way houses have been turned into a speculatively appreciating asset in much the world is absurd.
The way houses have been turned into a speculatively appreciating asset in much the world is absurd.
I think beside limiting property investors, curbing central bank zero interest rates will make housing more affordable. Why? Zero interest rates drives up all asset prizes including housing. Buyers buy housing that they can afford to pay the monthly mortgage on. Zero interest rates by central banks undermines the UN article 17 human right to own property, instead you rent from banks.
I argue that there wouldn't be so many property speculators if the interest rate weren't set artificially close to zero by central banks purchasing bonds.
UN human right of right to own property "Article 17
UN human right of right to own property "Article 17
Everyone has the right to own property alone as well as in association with others."This is really necessary.
I'm a senior engineer, my wife is a neurologist, we are currently not able to afford a pretty normal house in the city.
Even if we did, buying now is a enormous waste of money. The market has been bad for years and it's absolutely out of control now.
I'm a senior engineer, my wife is a neurologist, we are currently not able to afford a pretty normal house in the city.
Even if we did, buying now is a enormous waste of money. The market has been bad for years and it's absolutely out of control now.
> I'm a senior engineer, my wife is a neurologist, we are currently not able to afford a pretty normal house in the city.
I don’t understand why people think having a certain job means it’s more of a travesty that they can’t get a house.
Everyone should be able to get a house. Whatever your jobs are is irrelevant.
I don’t understand why people think having a certain job means it’s more of a travesty that they can’t get a house.
Everyone should be able to get a house. Whatever your jobs are is irrelevant.
Of course, but I think the point the previous poster was making that even with well-paid jobs well above the average it's very hard to find something reasonable that fits in your budget, which underscores the point that for people at the average it's damn near impossible.
I'm very unhappy about this. It won't be possible to buy a reasonable retirement income anymore and all the profits of the property sector will flow toward those deep pocketed property firms who have the right political connections to get permits. I think the governments just want to work us till we either reach a much extended retirement age or die from depression (which you can be euthanized for here). I'll be fighting to get a second property in the coming months to rent out.
If you are buying to rent in the Dutch market, and you are not part of the royal family, or a Black Rock fund you are making a big mistake. You are in a legal environment where you will not be able to evict a non paying tenant for several years. If there are children in the picture or a divorce you will have even more serious problems. The Belastingen will come after your earnings plus, you are likely to be victim of a legal environment biased to puritanical inspired laws, that try to hit back at anybody trying to get ahead of their neighbors in the same street. In other words, there are strong forces to make you get back to conformity, on what is a very homogeneous society. You will be taking on a huge amount of risk that normally only professional well funded investors are able to weather.
Eviction is already possible after 3 months of not paying rents (and sometimes after 2 months if there's a history of non-payment). The landlord has to get a court order, which is commonly granted.
Minors will be placed in foster care if they cannot be placed elsewhere.
Taxes on earnings depend on how you structure your work. They are usually in "box 3" where taxes are based on fictitious returns on investment as a percentage of total wealth and (fictitious) asset class.
That said, law-makers are a significant source of uncertainty and risk.
Minors will be placed in foster care if they cannot be placed elsewhere.
Taxes on earnings depend on how you structure your work. They are usually in "box 3" where taxes are based on fictitious returns on investment as a percentage of total wealth and (fictitious) asset class.
That said, law-makers are a significant source of uncertainty and risk.
Well not at the moment to start with:
"Government rules that tenants cannot be evicted during corona crisis"
https://www.iamexpat.nl/housing/real-estate-news/government-...
Also tenants can sign contract with you ( as landlord) and immediately go to the Huur Commissie and argue their rent is too high. So it will be lowered if they first signed a different contract with the landlord.
https://www.huurcommissie.nl/
Concerning what you seem to describe as a very smooth process I have strong doubts. If a tenant lawyer argues there is a temporary situation with the family, children take priority etc...A Dutch judge will not ignore all that, and simply take the major step of putting children under foster care, if the landlord does not need the house to live there himself. Specially taking into account the dire situation of foster care in the Netherlands:
"The decline in foster parents means that the Netherlands is facing a shortage. According to Foster Care Netherlands, 3,500 foster families are needed each year. Last year there were only 2,566. Currently over 700 children are waiting for a place in a family..."
https://nltimes.nl/2020/01/09/many-foster-parents-quit-lack-...
I know a landlord who waited 2 years. Just a data point I would agree, but I strongly doubt its the smooth process you describe.
"Government rules that tenants cannot be evicted during corona crisis"
https://www.iamexpat.nl/housing/real-estate-news/government-...
Also tenants can sign contract with you ( as landlord) and immediately go to the Huur Commissie and argue their rent is too high. So it will be lowered if they first signed a different contract with the landlord.
https://www.huurcommissie.nl/
Concerning what you seem to describe as a very smooth process I have strong doubts. If a tenant lawyer argues there is a temporary situation with the family, children take priority etc...A Dutch judge will not ignore all that, and simply take the major step of putting children under foster care, if the landlord does not need the house to live there himself. Specially taking into account the dire situation of foster care in the Netherlands:
"The decline in foster parents means that the Netherlands is facing a shortage. According to Foster Care Netherlands, 3,500 foster families are needed each year. Last year there were only 2,566. Currently over 700 children are waiting for a place in a family..."
https://nltimes.nl/2020/01/09/many-foster-parents-quit-lack-...
I know a landlord who waited 2 years. Just a data point I would agree, but I strongly doubt its the smooth process you describe.
> "Government rules that tenants cannot be evicted during corona crisis"
The above is an agreement between several housing cooperations/companies and the ministry. It is not a law and eviction orders due to backpay have still been granted after June 2020, when access to the courts opened up again for these cases.
And yes, judges will consider the interests of all parties. In the case where a judge won't grant an eviction, the tenant will be ordered to pay missed rent.
> Also tenants can sign contract with you ( as landlord) and immediately go to the Huur Commissie and argue their rent is too high. So it will be lowered if they first signed a different contract with the landlord.
This is only possible for social housing (based on the point system), so this shouldn't come as a surprise for the landlord. This is also a reason to avoid renting out social housing.
The only thing during COVID that's affecting most landlords is that rent increase is maximized. Considering that employees are supported via their employer's NOW-subsidy, I don't buy the argument for this maximization for people that still have jobs. Another benefit to offering only temporary contracts.
> I know a landlord who waited 2 years.
Waited two years before getting an order, or only successfully getting an order after two years?
The above is an agreement between several housing cooperations/companies and the ministry. It is not a law and eviction orders due to backpay have still been granted after June 2020, when access to the courts opened up again for these cases.
And yes, judges will consider the interests of all parties. In the case where a judge won't grant an eviction, the tenant will be ordered to pay missed rent.
> Also tenants can sign contract with you ( as landlord) and immediately go to the Huur Commissie and argue their rent is too high. So it will be lowered if they first signed a different contract with the landlord.
This is only possible for social housing (based on the point system), so this shouldn't come as a surprise for the landlord. This is also a reason to avoid renting out social housing.
The only thing during COVID that's affecting most landlords is that rent increase is maximized. Considering that employees are supported via their employer's NOW-subsidy, I don't buy the argument for this maximization for people that still have jobs. Another benefit to offering only temporary contracts.
> I know a landlord who waited 2 years.
Waited two years before getting an order, or only successfully getting an order after two years?
My grandparents and my brother already rent out property. There's risks to it of course but that's the case with all investments
Title is inaccurate. It should read:
> Dutch cities want to ban property investors from buying some kinds of apartments in some or all neighborhoods
I'm all for this. However, it is insufficient, because small-scale property investors may not be considered as such, but as buying an apartment for a family member or a friend etc. Or they will just "lend" money to someone to buy the apartment.
Generally, the situation in which individuals have full ownership of apartments or houses other than those they live in is problematic.
> Dutch cities want to ban property investors from buying some kinds of apartments in some or all neighborhoods
I'm all for this. However, it is insufficient, because small-scale property investors may not be considered as such, but as buying an apartment for a family member or a friend etc. Or they will just "lend" money to someone to buy the apartment.
Generally, the situation in which individuals have full ownership of apartments or houses other than those they live in is problematic.
This is a common policy across the world. It is based on flawed reasoning, and won't work.
Simply put, housing isn't getting more expensive because investors are buying houses. The causation is the opposite: Investors are buying housing because its value is consistently going up, making it a good investment.
So why are prices going up?
Prices are formed by the forces of supply and demand. In the regions I know about, housing supply is severely limited by regulations/laws that makes building new housing hard.
Simply put, housing isn't getting more expensive because investors are buying houses. The causation is the opposite: Investors are buying housing because its value is consistently going up, making it a good investment.
So why are prices going up?
Prices are formed by the forces of supply and demand. In the regions I know about, housing supply is severely limited by regulations/laws that makes building new housing hard.
>Prices are formed by the forces of supply and demand.
Technically the problem is that the supply is permanently fixed. There is no force on the supply side.
Technically the problem is that the supply is permanently fixed. There is no force on the supply side.
I think real solution is to increase governmental supply. That is push market rates so much down that only marginal gains from property could be gained. Let's say 2% year... Property shouldn't really appreciate very much over time.
In the US at least though I believe zoning is the issue.
Our zoning laws are so bad and it is so hard to add to supply that no one really bothers much.
There are all kinds of dislocations in the market because what you should see right now is massive amounts of home building but you do not. 15 minutes away from me there is a ton of open land that could practically be built into a entire new town. I would imagine the larger the project the more bullshit you have to deal with when it comes to permits, zoning, political pushback, palms that need grease.
If you compare the work, risk/reward to alternative investments like just holding the stock market index it becomes a bad investment so it doesn't get made.
We have all these self reinforcing distortions happening in the market that probably can't be fixed.
Our zoning laws are so bad and it is so hard to add to supply that no one really bothers much.
There are all kinds of dislocations in the market because what you should see right now is massive amounts of home building but you do not. 15 minutes away from me there is a ton of open land that could practically be built into a entire new town. I would imagine the larger the project the more bullshit you have to deal with when it comes to permits, zoning, political pushback, palms that need grease.
If you compare the work, risk/reward to alternative investments like just holding the stock market index it becomes a bad investment so it doesn't get made.
We have all these self reinforcing distortions happening in the market that probably can't be fixed.
Governments are printing money, inflation is eating savings. Properties are safe and easy way to protect money.
When buying properties will be banned, what would you recommend as an alternative?
When buying properties will be banned, what would you recommend as an alternative?
Wish they'd do this in the town I'm residing, so many houses are vacant, it's really hard to find something to buy, its very annoying.
One day an intergalactic 5th dimension demon investor will buy earth and rent it back to us for 1 Billion souls per year. What madness.
Instead of banning, it's better to steer with taxation. Tax on empty houses (no permanent address) changes incentives.
Refreshing to see this conversation play out while the silicon valley neoliberals are fast asleep. I want this in my city. People in my life are struggling to keep up with housing prices. It's obscene.
There's a history of violent protests and riots about housing in Amsterdam, and a slogan "Geen woning, geen kroning" (No house, no coronation):
https://en.wikipedia.org/wiki/Amsterdam_coronation_riots
>Amsterdam coronation riots
>The Amsterdam coronation riots (Dutch: Kroningsoproer) refers to major violence and rioting in Amsterdam, the Netherlands on the day of the accession of Queen Beatrix, 30 April 1980. It was one of the biggest episodes of such disturbances in the country since the end of World War II and the most significant event of the Dutch squatters' movement (Krakersrellen).
>Since the 1960s and the 1970s, squatting had become common in Amsterdam to protest the city's shortage of housing. Many of the protesters were youngsters of the baby boomer generation. The 1980 riots were precended by the Nieuwmarkt Riots in 1975 and the Vondelstraat Riots in March 1980, when authorities heavily responded to evict squatters from properties in the city.
https://en.wikipedia.org/wiki/Amsterdam_coronation_riots
>Amsterdam coronation riots
>The Amsterdam coronation riots (Dutch: Kroningsoproer) refers to major violence and rioting in Amsterdam, the Netherlands on the day of the accession of Queen Beatrix, 30 April 1980. It was one of the biggest episodes of such disturbances in the country since the end of World War II and the most significant event of the Dutch squatters' movement (Krakersrellen).
>Since the 1960s and the 1970s, squatting had become common in Amsterdam to protest the city's shortage of housing. Many of the protesters were youngsters of the baby boomer generation. The 1980 riots were precended by the Nieuwmarkt Riots in 1975 and the Vondelstraat Riots in March 1980, when authorities heavily responded to evict squatters from properties in the city.
Tax investment properties at 5x the rate of dwellings.
Please, please make the same thing happen across Canada
They need to do this in most big cities TBH
why ban? why not tax more and/or restrict it to, say 10% of all properties?
If the price of properties fall dramatically won't that have an adverse affect on property owners? Imagine shelling out £1M on a house, and spending 20 years paying it off. Now, at the end of that time period the house is worth half of that. I'm not an expert but is closing off an entire section of Capitalism going to work flawlessly?
And what's wrong with that? You still own the house in full and can live in it till you die whether it's worth $1MM or $1. There should be no guarantee for your house to appreciate over time; that's what got us in this mess in the first place.
If you want to turn your housing into an invested vehicle to sell an make you rich then you're basically gambling and should fully accept the risks of losing money in the process like with any other investment.
Capitalism also means letting bad business or poor investments go bust, not prop them up artificially for decades via low interest rates, zoning laws and nimbyism to make them worth more.
If you want to turn your housing into an invested vehicle to sell an make you rich then you're basically gambling and should fully accept the risks of losing money in the process like with any other investment.
Capitalism also means letting bad business or poor investments go bust, not prop them up artificially for decades via low interest rates, zoning laws and nimbyism to make them worth more.
More like this please
Interested how this plays out in other countries in terms of both reception and actual effect. The current Korean gov set out to reduce house prices by various methods: e.g. high property taxes on houses that are not the owners primary residence, banning loans/mortage for flipping homes, etc. But prices have gone up more during this regulation. People suspect its actually driving buyers to buy before more regulations in the future.
I feel like the only way would be to restrict to one house per co-residence family unit in contested cities. But I have no knowledge of real estate/economics, and I'm sure it'll be called communism. So really feels like a near impossible problem to solve.
I feel like the only way would be to restrict to one house per co-residence family unit in contested cities. But I have no knowledge of real estate/economics, and I'm sure it'll be called communism. So really feels like a near impossible problem to solve.
As others have mentioned the best solution is to just build a massive supply of houses, in order for supply to outstrip demand. This, however, is unlikely to happen in the next 10-15 years. Especially if The Netherlands keeps the current immigration levels up (~400 people per week).
So they want to make renting impossible? That surely won't help low income people.
The Dutch system caters for that through the social housing system. There are special companies that get permits to own houses and rent them at cheap prices for disadvantaged groups.
In theory you are right. In practice this part of the system is having problems too:
- people who used to move on to a larger house stay because of the increased costs
- older houses are broken down and are replaced by newer ones … but due to building regulations fewer are build at the same place
- due to stagnation in outflow and decreased number of houses the waiting time for getting a “social house” is increased by a ridiculous amount. In Eindhoven it is more than 10 years - in theory. But due to rules about preferred placement it’s often way more.Ah, so a government monopoly on a common part of markets. Usually such action has downsides, in the same way rent controls end up hurting renters.
why not banning foreign buyers first. then corporations. homes should be for the people. it should be cheaper to acquire a home u live in than an home u buy to speculate/rent. And the difference should be way higher than a few % tax more
It seems there intent is to reduce the number of people who buy property just for investments, and then potentially sit on empty property waiting for opportunities. Banning foreign buyers would just do that, banning foreign buyers, which does not seem to be their intent. Even Dutch people buy property and just sit on it, like what happens in other countries as well.
Not sure how focusing on if someone is Dutch or not will help the situation, compared to banning speculative property investment as a whole instead.
Not sure how focusing on if someone is Dutch or not will help the situation, compared to banning speculative property investment as a whole instead.
Absentee landlords were notorious for allowing their Irish tenant's properties and amenities decay, while continuing to extracting rent. Yet back at home they were known as philanthropists who gave generously to "their own" poor houses and churches. People tend to care whether or not they are judged poorly, but only by peers and neighbours.
It may not make any difference who the investor is, but then again it may. Also, if the investor is resident, could there be other ways to ensure that they are not simply wringing every cent out of their investment with no reinvestment?
It may not make any difference who the investor is, but then again it may. Also, if the investor is resident, could there be other ways to ensure that they are not simply wringing every cent out of their investment with no reinvestment?
I'd like to see data on who can afford to sit on an empty property. I've heard of Chinese money trying to avoid Chinese government crackdowns or really rich families who refuse to sell empty houses, I don't see how the average investor could afford it.
Won't this result in higher rent prices for those that don't have the funds or interest in purchasing property?
>it should be cheaper to acquire a home u live in than an home u buy to speculate/rent. And the difference should be way higher than a few % tax more
At least in Norway your primary home is exempt from property tax. I guess that's one reason why we have a home ownership rate of over 80%.
At least in Norway your primary home is exempt from property tax. I guess that's one reason why we have a home ownership rate of over 80%.
What's the deal with landlord hate?
If I buy a lawnmower, pool, or whatever else and rent it out you all are ok with that.
If I buy a house and rent it out suddenly I'm an "enemy of the people".
If I buy a lawnmower, pool, or whatever else and rent it out you all are ok with that.
If I buy a house and rent it out suddenly I'm an "enemy of the people".
Most leftists are driven by envy; they see someone else has something they can't afford, and they feel rage. They can't afford multiple houses, so seeing people with multiple houses triggers this feeling. Fundamentally it's because they're so ego-driven they can't accept the market rewards people fairly, because doing so would require accepting that someone else deserves those houses more than they do.
I want to become a landlords and I do not want to think about the moral implications of rent seeking. If the government simply taxed the unfair gains I received through rent seeking then I would have no moral qualms about other landlords. I would be very happy to pay land value taxes if that is what it takes to make free market capitalism fair again.
I do not envy Jeff Bezoz for owning $200 billion in stocks. I do not envy Bill Gates for owning Microsoft. I consider Bill Gates accumulating farmland without paying a tax to compensate for his monopoly rights to be a form of extortion that should not be allowed.
>Most leftists are driven by envy; they see someone else has something they can't afford, and they feel rage.
I don't.
> They can't afford multiple houses, so seeing people with multiple houses triggers this feeling.
I am always in favor of a land value tax that taxes home owners and large scale investors at the same rate. The reason why I have to make a concession to primary residences is that home owners would vote against the tax and the land value tax wouldn't be introduced at all.
>Fundamentally it's because they're so ego-driven they can't accept the market rewards people fairly,
How can abusing the monopoly of location be considered a fair reward? You are distorting the market.
> because doing so would require accepting that someone else deserves those houses more than they do.
No, it's the opposite. You can buy the land 30 years ago and let the property on top sit vacant and still net a return because the value of the land has risen. Such an investor made a lot of money without deserving the land at all. If land had a holding fee then only those who can extract the most value out of the land would seek it out.
I do not envy Jeff Bezoz for owning $200 billion in stocks. I do not envy Bill Gates for owning Microsoft. I consider Bill Gates accumulating farmland without paying a tax to compensate for his monopoly rights to be a form of extortion that should not be allowed.
>Most leftists are driven by envy; they see someone else has something they can't afford, and they feel rage.
I don't.
> They can't afford multiple houses, so seeing people with multiple houses triggers this feeling.
I am always in favor of a land value tax that taxes home owners and large scale investors at the same rate. The reason why I have to make a concession to primary residences is that home owners would vote against the tax and the land value tax wouldn't be introduced at all.
>Fundamentally it's because they're so ego-driven they can't accept the market rewards people fairly,
How can abusing the monopoly of location be considered a fair reward? You are distorting the market.
> because doing so would require accepting that someone else deserves those houses more than they do.
No, it's the opposite. You can buy the land 30 years ago and let the property on top sit vacant and still net a return because the value of the land has risen. Such an investor made a lot of money without deserving the land at all. If land had a holding fee then only those who can extract the most value out of the land would seek it out.
This doesn't make much sense to me.
Considering the high degree of competition in ~all rental markets, claims of monopoly are unfounded.
Returns on capital for land-owning businesses aren't higher than other sectors.
In the US in particular, we have ludicrisly large amounts of space. Even in our most expensive areas we don't approach the density of places like Hong Kong. Scarcity, as usual, is due to government fiat.
Considering the high degree of competition in ~all rental markets, claims of monopoly are unfounded.
Returns on capital for land-owning businesses aren't higher than other sectors.
In the US in particular, we have ludicrisly large amounts of space. Even in our most expensive areas we don't approach the density of places like Hong Kong. Scarcity, as usual, is due to government fiat.
I can’t read a clickbait article. It reminds me of when some Swiss people wanted to use their power of direct democracy to put a cap on CEO pay. The Swiss were smart enough to vote it down. If every country had such a system, the world would quickly burst into flames. And here we have some Dutch people who want to nationalize housing development. Because without private investors, there will be nobody else besides the government to develop housing. The dutch and their government are exceptional enough to make it work I would imagine. But a lesser government would quickly turn nationalized housing into a disaster.
These people are angry at housing prices. Just wait a while longer and the housing investors will all be experiencing something much more painful than a government buyout and your houses will be quite affordable. That the beauty of a free market.
These people are angry at housing prices. Just wait a while longer and the housing investors will all be experiencing something much more painful than a government buyout and your houses will be quite affordable. That the beauty of a free market.
1) Visiting London and spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on. Suggestion is the others are effectively uninhabited, and a search on RightMove shows properties sell for £20-£30m for a 4/5 bed. This isn't normal Londoners, it's outside investment.
2) Cornwall, where I live - an insane house price rise over lockdown as city dwellers aim for the beautiful bits of the country. Literally no way now you could afford your first home round here on minimum wage, and some towns have a high (>50) % holiday or second homes.
It's an untenable situation. I think my generation (I'm nearly 50) are probably the last to be able to afford their own home on anything other than a massive wage.
Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.