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Comment by s_q_b | Hacker News Reader

In DC, there's a big glut in foreign capital flowing in from foreign oligarchs and elites, particularly from Russia and China. Residential properties in so-called "safe cities" are both a form of investment and a potential life-raft should the political situation change in their nations.In addition to the artificially low supply created by extreme height limitations, this has caused prices to skyrocket.

The apartment in which my girlfriend and I live now was a cash purchase after only three days on the market with no escrow. It had to be, or someone else would have bested it. If you need a loan to buy? Forget it.

Meanwhile, there are six immaculately tended walk-ups on the block that have been completely empty for the past year, but for the staff.

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Vancouver recently enacted an anti foreign buyer tax that seems to have almost completely stopped the practice. Curious if we will start to see more and more of this local protionism.

Unless every desirable city introduces this tax uniformly, doesn't this just shift the burden from Vancouver onto other cities?

This is why it should go viral. Wealthy individuals/ buying houses in droves to sit empty does not benefit anyone in the long run.

What happens when the bubble pops?

I think they should be allowed to buy the homes, but then face stiff property taxes (with a homestead exemption for actual residents). The property taxes on Billionaire's Row in NYC are often absurdly low:

http://www.citylab.com/housing/2015/05/why-billionaires-dont...

They will pay pensioners to live there 'on paper' to meet your homestead requirement.

The whole tax penalty is thwarted that way

At least they'll be occupied that way. Maybe they can even have whole families move in there, with some sort of agreement that they receive a monthly payment in exchange.

If you realitet the oner to live there and pay property taxes is quite risky to use a straw man.

Right now I'm paying rent like a sucker when I could be paid to live here instead? Sounds good to me.

Happily the 421-a exemption program referenced in that article was allowed to expire. Not because of a consensus that it was a bad idea (which it was) but because of a pissing match between the governor and the mayor. We have to take our victories where we can get them; hopefully they'll continue fighting forever.

We still have structural problems in the city property tax code -- for example condo and co-op buildings have to be taxed as if they were rental buildings, a complex calculation that generally undervalues them. But if and when those are fixed, I think full property taxes are would be enough. I don't see the need for a punitive rate on top of that. At least not in NYC, other cities may have a bigger problem with absentee owners.

What happens until the bubble pops I think is the question. To quote the OA...

"In the evenings an eerie stillness settles on [the area]. That’s because these new owners are so rich in both money and global property that their London addresses frequently sit empty, functioning more as dust-sheeted deposit boxes rather than actual homes."

This is not why we have cities. We have cities to allow interaction. Look where the artists, musicians and marginal people are going, for they are the new thing. Hint: it isn't London.

Where is it today? I hear Liverpool is having a bit of a renaissance.

Jamaica Street, up as far as Camp and Furnace, but I hear that the end nearer town is being gentrified. And classical musicians and fine artists are heading to Berlin where it is still possible to rent a (effing) flat.

The bubble will be forcefully burst when homeless people start squatting; or pranksters vandalize them.

Sure, the bubble bursting I have no problem with: rich people take a haircut and premises are repurposed. I walk through Digbeth in Birmingham most days: Early Victorian housing that is now car scrap yards and workshops. It all gets recycled.

Anyone who's bought recently with a full mortgage will experience a burst bubble not as a haircut but as a plummet into negative equity. I suppose you could argue that they took on the risk, and other such risk-takers have made big profits. Personally I think it's crazy that individuals are expected to make these huge gambles. But people don't seem to take seriously my suggestion of nationalising land ownership...

I see similar comments on all of these articles and I am really curious which UK/USA/Canada cities that artists and musicians and the like go to.

I'm going to throw out Nashville as a thought for musicians, and maybe Pittsburgh for tinkerers.

UK artists are heading to Berlin, Paris, Barcelona and Warsaw - at least they were, until Brexit.

Now there's some interest in the cheaper seaside towns - Margate, even Bournemouth.

Brighton used to be on that list but it's almost as expensive as London now. Likewise Bath and Bristol. (Not seaside towns, but a big arts scene in the 60s and 70s, now very much gentrified.)

I suspect if people can't get out they'll head West and North. Parts of the West Country are almost affordable. Parts of the North are very affordable, but they're still in the dilapidation phase and don't seem to be in danger of becoming cool yet.

It's tough to figure what pulls a place out of the dilapidation phase. I've heard people say a microbrewery is a good harbinger. I have this unformed suspicion that a hipstery cheap-fancy restaurant can do it, or the "right" art gallery

My area of Brussels has been slowly pulling itself out of dilapidation for decades. The signs are e. g. new bars and shops that don't close after six months, and of course the inevitable loftification of older buildings. There is no single event. It takes masses of people to move, invest, and thrive.

Yes you are right about Margate. It's becoming really popular with artists and artisan craftsman. I don't live there but I can see the growth as more people are moving there from London.

Nashville, Austin, and Boulder are peaking or have peaked. Tech in Philadelphia is right at the tipping point. To skate to where the puck is going, look to the Rust Belt.

While I understand and agree with the sentiment of your comment...

The idea of a tax virus sounds terrifying!

It does. Should Vancouver not act to protect its own citizens to the best of its ability, then?

The same logic works for all Protectionist legislation. Yet free trade has lowered the costs of nearly every good in our lives.

Free trade maximizes GDP at the cost of further wealth inequality within the closed system of a nation.

There's a tipping point coming fairly soon where voters will logically prefer the short term benefits of protectionism vs additional inequality.

If capitalists want to continue down the path of free trade, they better be prepared to redistribute the additional wealth generated. That or find a way to disenfranchise a whole lot of pissed off citizens.

No it hasn't really.

Technological development has lowered the costs and availability of most things in our lives. If you look at the actual practices of governments and individuals over the last few centuries you won't find much truly free trade. You'll find all kinds of protectionism, exploits of positional control over markets, currency flows (I'm looking at you China), and the occasional super-power deciding to to have a war on ... well slavery was the one that mostly worked.

But free trade? Well, most countries agree that they should be allowed to freely export whatever they want... imports are another matter of course.

Other cities are welcome to more affordable housing and extra tax revenue by introducing the same tax. Win-win for everyone except wealthy foreign buyers, no?

Yes. Assuming the tax actually works as expected (it's probably too soon to tell now), the burden will be shifted onto other cities that are too stupid or dysfunctional to enact the same tax.

I don't see a problem here. The problem will correct itself eventually, with regular citydwellers all moving to cities smart enough to enact these laws, and abandoning cities like London that become completely unaffordable. Eventually the latter cities will collapse, and these wealthy foreigners' properties will be worthless, like all the $100 houses in Detroit.

My condo is Toronto is going up in value pretty quickly. I'm still 100% opposed to the Vancouver tax, but in theory it's making my assets increase in value.

> almost completely stopped the practice

That is way overselling any evidence of what's happened. The tax was enacted less than a month ago. Volumes are way down right now, but the effect on prices are uncertain. I think the consensus is that people are in wait-and-see mode.

More sales records are being set even after the new tax http://vancouversun.com/business/real-estate/tax-shows-no-si...

The same thing's happening in Philadelphia, so no doubt New York and DC are running out of places to snatch up. It's insane. I landed a pretty sweet deal on an old building close to the Delaware River for ~$265,000. A vacant lot near us sold for about the same a couple of years before that. This year, the lot behind us went on the market for $600,000 - a number I thought was pretty absurd.

But two days after it had been on the market, I saw a couple of guys walking through the vacant lots. I introduced myself and asked if they had any questions about the neighborhood. In a heavy accent, the younger guy asked "Who owns these other lots? Do you think they would sell them?" They wanted to buy up every vacant lot and wrap our building with condos. I mentioned the vacant lot that had just gone up for $600,000 - the older Russian smiled, saying "We make good offer. Seven hundred thousand cash."

I figured maybe they were boasting. That week, the lot went off the market.

On one hand, I feel like we got in when the getting was good, but on the other hand, I'm not terribly excited about what's going to get built around us. I think my general feeling about it is best summed up as, "Oh boy, here we go."

If you aren't particularly attached to the area/house, it might be time to cash out and move somewhere more reasonable.

Without getting too into the details, we're improving a small performing arts space on the first floor, a little apartment on the second floor, and building larger apartment on the third floor. If I were doing this for cash, I'd have just built five stories of apartments, and could retire somewhere boring and suburban as an absentee landlord. This is more of a 'fostering the arts' and 'living in a walkable urban environment' thing.

They say you can make a small fortune in theater - you start with a big fortune. You build a theater, and now you've got a small fortune ;)

I feel like there is a massive opportunity to be had here from managing and renting out these places.

I'm pretty sure foreign oligarchs aren't interested in AirBnB-style arrangements.

Maybe afarrell wasn't talking about the oligarchs being the ones renting out the spaces.

That's a fair point, and this is merely my opinion, but if I could afford housing all over the world, I certainly wouldn't want to deal with the fact that I maybe cannot go visit London/NYC/wherever on a whim and stay at my own private residence. Renting has downsides even with "perfect renting arrangements" which cannot be mitigated by a third party (well, without presumably breaking an entire host of laws).

That's kind of what I was jokingly suggesting; that the caretakers - who likely are the only ones who see the inside of the place for years - just surreptitiously rent it out from under the actual owner.

People dumping hundreds of millions into the market just to hide it from external forces aren't interested in being landlords.

They don't want to make a few percent on their capital?

They probably don't want any more of a paper trail leading back to them than they have to.

A net zero property seems like it could generate less paperwork if the management balanced incomming and outgoing payments, (less their fee.)

How exactly do they pay utilities/etc without anyone noticing their transfers? But I don't believe they are successfully hiding anything in any case, governments want everyone to be guilty of something so they can achieve whatever political outcome they need through selective enforcement.

People who can afford to buy overseas property for cash "just in case" are probably not worried about making an extra $3k/month, not if it adds the headache of being a landlord.

Note that £20-45k/month (US$25-60k/month) is more like the going rate for these properties.

http://www.nestoria.co.uk/mayfair/property/rent/2?price_min=...

But either the owner isn't interested in the money/hassle/attention, or occasionally uses the property — it's difficult to show off your fancy London apartment if people are living in it, and you can't casually lend it to friends or relatives.

I reckon people with $25-60/month to rent out these properties would already have enough money to buy their own homes slightly away from the city center

They probably do, but that doesn't mean they want to live there.

I pay $2k to live in a city centre. I could pay half that to live at the edge of the city, but then I'd be at the edge of the city.

Being a landlord is a huge hassle, and it makes the property harder to sell when you need the cash back.

Yep, tenants laws add a new layer of complexity to the asset, which as a wealth sink isn't really needed.

There are people that behave in ways I considered pretty irrationaly with their capital... and they work out.

If they're getting an absurd percentage increase from property values alone, an extra few percent won't make a difference.

Not everyone min-maxes their capital. Governments probably end up eating them through inflation and taxes in the long run (but in the long run, we're all dead).

There's a better opportunity in buying rundown/condemned places and selling them for 4-6x to overseas money who apparently don't look before buying. See "crackshackormansion" below - everything that's not a mansion is just begging to be flipped.

Many of these properties are new builds and drop in value as soon as they are 'lived in'.

The problem is much worse here in SV. Lots of all cash buyers from abroad. When I was house hunting last year every house we lost was won buy an all cash foreign buyer. I also know many families where this was also the case.

Russia, New York, LA, S.F., all the same. And there are property developers now who are developing property not for the rank and file of those cities but to attract the hot money from non-residents/non citizens who may only use them a few months out of the year if at all. There doesn't seem to be an in sight either.

Related is this story right now: http://www.nytimes.com/2016/07/21/world/asia/1mdb-malaysia-u...

I believe problems with the metro system becoming completely unreliable have also caused prices in DC itself to increase, since it forces people who work in DC to live closer to their jobs.

There is a lot of new construction in different parts of Virginia along the orange line, but the vacancy rates are extremely high. Fewer people want to pay a premium to live by an orange line station with the current problems.

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