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Comment by baybal2 | Hacker News Reader

>Low interest rates and innovations in the mortgage market may also be to blame

Low interest rates and innovations in the mortgage market are to blame

You are simply letting a person to buy more of any big, expensive asset. And the thing does gets out of control fast when there is a even minimal expectation of appreciation, and inflation fears.

And that on top of the fact that real estate is the only "investment" possible for an ordinary person without employing an officeload of securities attorneys in many countries.

Chinese housing market is the prime example (2B vacant square metres, with even more in the pipeline)

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All real estate is local.

Certainly the innovations mentioned are part of the issue for most markets, but for some markets there are other impprtant factors:

* The flood of expat money (Vancouver)

* Supply constraints due to geography and/or Nimbyism coupled with net in migration (Bay area)

* Builder hesitation plus in migration (Front range of Colorado)

Hard to paint one picture. However, making mortgages easier to get has a broad effect on demand, which will definitely shift the curve.

But there are other factors like tax. In the UK for example you generally won't need to pay capital gains tax when selling your main home...

Ita the same in the US, except for windfall gains over $250K/person (x2 for married couples), a vanishingly small fraction of inventory.

... and even as your second home capital gains is taxed at a lower rate than income. Plus it can be deferred until you die! If your estate is big enough to be worth it you can form a trust and defer it forever.

That unpaid tax flows straight back into the housing market.

> All real estate is local.

> The flood of expat money (foreign investment)

these two statements are contradictory

The supply is local, the demand not necessarily so. Hence Vancouver's recent tax on foreign buyers.

I'd venture to say this should get more attention than it does. Real estate was local. Glass-steagal (sp?) changed who is valuing the property and from where. Putting pressure on home values based on skewed national or international perspectives that are completely non-local.

No, why? The expat money went into local markets (very unequally but that's another point). Vancouver, London, etc. But even in small towns real estate investors are not necessarily local. My mother just moved into an apartment owned by a lawyer living a few hundred kilometers away.

It depends on what you understand when OP says "all real estate is local", I assume that it's the thing itself and its customers. It can be seen as inexact because yes, the investors often are not and that is that second statement, but we all know what OP meant, so no need to start nitpicking over nothing. I see no merit in arguing over words whose meaning everybody understands just for the sake of it.

At the high end, the money didn't go anywhere, except possibly offshore. A lot of London real estate was being built explicitly as an investment, and the offshore investors - who are now being cleaned out - handed over their money to developer/speculator companies, who were also offshore and/or foreign owned.

So no - this real estate is not local. It happens to have a physical location, but when you understand how the money associated with it does it best to avoid spreading out into the surroundings, it might as well be built on an uninhabited atoll in the Pacific.

At the low end in London the money went to landlords who bought large portfolios with the financial assistance of buy-to-let loans and tax breaks.

The tax breaks are being removed, and interest rates are drifting upwards. This is killing casual landlords, but isn't a problem for the sharks and the rabbit hutch 10-gig-economy-workers-in-a-room slumlords.

Real estate supply is local; real estate demand, via capital, is not.

Lower interest rates opened housing inventory to more people who were and ready to purchase it at already ridiculously low prices since the market crash of 2008. This is part of what got me into my house.

> You are simply letting a person to buy more of any big

True, but that is grossly incomplete. It suggests that single individuals (or agencies) are gobbling up a plurality of real estate. It is also true that many people are each purchasing single houses.

Also constrained inventory appears to be a reality only on the US coasts. In my geography they continue to build thousands more houses every year. Inventory is hardly limited and yet prices and demand are both continually increasing year over year.

I think you are talking about a minority of buyers.

Structurally what is happening for the majority?

"In 1991, 67% of British 25- to 34-year-olds owned property; today only 37% do." is the problem. Not how some of those individuals within the 37% came to own their home.

Yeah. We’re seeing a similar effect in the price of education.

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