Dutch cities want to ban property investors in all neighborhoods
nltimes.nl
nltimes.nl
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.
Londongrad is an exception to what is otherwise a rule.
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.
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.
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-...
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.
I mean, nobody complains in the US if the average family can’t buy a home in Manhattan. That’s just unreasonable.
Average wage in London, not average overall.
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.
Whats's next, "why should an average person be able to afford an education or healthcare"?
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.
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).
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.
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).
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
Buy it from who? Locals. So who gets the money? Locals.
But anyway the point was don’t divide people into insiders and ‘outsiders’.
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...
Until one of us creates a free-ish software to help them do that ofc.
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.
But we have fools that celebrate rising house prices because their nominal net worth went up
Everyone wants prices to remain the same forever. That takes a neutral population growth or more supply
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 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.
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.
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.
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
And I've noticed that in the US, the observations that cars are typically depreciating assets never really stopped people from buying them.
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.
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.
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.
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.
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!
We’re arguing the same thing. Everyone wants to go to the beach. The ability to get cash to do so increased demand.
Having more people willing to pay contributes to price increases
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
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.
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.
How do you reliably isolate the effect of the pandemic from other effects occurring at the same time?
Forgive me since I’m American, but wasn’t getting rid of foreigners taking jobs one of the selling points of Brexit?
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.
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.
Note that laurent92 talks about "Englishmen" not "British voices". That's incredibly telling.
- 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.
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.
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).
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.
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...
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.
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.
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!
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.
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.
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.
https://www.rightmove.co.uk/house-prices/detailMatching.html...
Pepperidge farms remembers.
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).
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'.
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
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.
> 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.
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.
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.
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.
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.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
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.
Charging 0% interest means the bank is losing money.
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.
> 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.
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.
...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.
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.
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.
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.
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.
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...
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...
The bank wasn't taking much risk on the adjustable rate.
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.
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.
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.
And the slightest increase in inflation will benefit them.
A competent central bank would make sure that it all balances out.
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.
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.
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...
That's £30k a year.
[0] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwor...
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.
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...
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.
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.
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.
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.
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!
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.
"The WILD Dutch housing market and our home buying flop | American in the Netherlands"
This seems to contradict your earlier claim that:
> the municipality already has laws in-place which fine owners of vacant homes
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.
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.
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.
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?
2.14 per home vs 3.54 in 1961.
I have no explanation why 17280000 / 7900000 = 2.187
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).
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...
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.
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.
The CIA even lists the Dutch housing market as the largest risk factor in the stability of the Dutch housing market.
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?
You did explicitly say houses but possibly the area is quieter and less inhabited out of term time.
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.
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.
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.
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
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?
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.
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.
[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 sure it’s helped, but it might be worse without it.
https://www.cambridgema.gov/departments/finance/propertytaxi...
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)
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.
An LVT might work but I think it is only ethical if you advantage primary residences with a complete lack of 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.
You can waive the higher taxes for very high density developments. Skyscrapers to require investors, and that is beneficial.
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.
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.
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.
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.
Current ubran policies in the western world, coupled with the normalization of remote working already do this to some extent.
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.
Who would want that house with that tax bill?
Obviously in real life, people care about other things besides just pure acreage, but you can see the argument.
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.
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.
LVT is paid by the owner of the land. That is the whole point of a LVT, that you cannot avoid it.
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.
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.
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.
This is the core distinction between LVT and property tax.
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.
In theory, it still has whatever value the optimal use would provide.
In reality we don’t have an optimal land use oracle, and valuation techniques would take the vacant lot as a data point suggesting that the area is bad. The assessed land value might decrease a tiny bit – along with that of your entire suburb, and similar regions. But it’s not going to zero.
Similarly, if you take a block of land, put 10 apartments on there, and fill them with renters, you’ll create property value where there was none, but the land value isn’t going to go up 10x.
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.
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.
That's also why there shouldn't be an exemption for first home.
Obviously made up those numbers but hope you get the idea.
If anything, it might end up being lower tax on residential housing, and much higher on commercial/retail.
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.
This relationship has always reminding me of medieval surfdom, i think it's deeply unfair and rigged and needs to be abolished.
>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.
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.
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.
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.
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.
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.
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.
The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
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.
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.
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?
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.
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?
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.
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.
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.
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...
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.
So private companies are allowed to engage in rent-seeking behavior but individuals aren't?
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 could possibly go wrong??
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).
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.
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 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.
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.
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.
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.
Even if not the only cause (is there ever just one isolated cause in economics), investing certainly is a big part.
If you claim that investors are causing a significant price increase then I think onus would be on you to cite a source.
Source(s), please.
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.
That is an exceptional claim that requires exceptional evidence.
(I also don’t know what you mean by “waterbed.”)
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.
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://www.bouwinvest.nl/media/4305/bouwinvest-dutch-real-e...
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.
"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.
----
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.
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.
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.
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.
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 is probably paying off various government officials around the world to make sure the laws are friendly to them.
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 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.
I think we can call these people serfs.
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.
The US CPI figures have no resemblance to your expenses if you live in one of the desirable and booming regions of the US.
How does housing affect inflation in that country?
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.
56% over 20 years is 2.25%ish per year.
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
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
If you have a higher interest mortgage the value of the house goes down but you still have the same monthly payment.
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.
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?
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.
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.
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.
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.
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".
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 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
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.
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?
And what about envy? That's clearly a big problem among commenters in this thread.
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.
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?
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.
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.
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?
How about dealing with envy? Seems you've sure got plenty of that.
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.
It is tax deductable, so you are taxed less, typically max 50% of the interest sum.
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.
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)
In some asian markets investors buy homes then sit on them unused for years. That’s a problem.
House prices rise, rent increases, common folk are struggling, investors are getting rich without doing anything.
It's just meh all over.
There is suburbs for that.
At best, this sounds an argument to hold people back. At worse, it sound like an argument to push people down.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
AirBnB investors just highlight the symptoms.
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.
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.
Remove the government subsidies and guarantees and improve price transparency.
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.
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.
Presumably not, unless those students are property investors.
So, who will be renting cheap and medium-priced homes?
There are already extremely severe shortages as exemplified by students camping in tents.
I'm not quite sure how worsening the situation for everyone by property investors hoarding houses would make it better for students, either.
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.
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 :)
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.
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.
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.
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.
All landowners are investors. They bought the property to make money. That makes them an investor. Maybe not a coporation but an investor.
I'm not seeing an issue that is directly exacerbated. There are simply more tools that can be (ab)used .
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
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.
It is an arbitrage and inefficiency scenario created by the ability of capital to move easily around the world, but not people.
Of course I want cities to build more. But I don't imagine it will ever actually lower the housing costs.
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.
There aren't enough houses for students right now.
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.
This whole sorry state of affairs makes me glad I left the country. That and how utterly abysmal IT salaries are.
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.
Why not a land value tax instead?
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.
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.
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.
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...
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?
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?
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.
I can already see investors swooping into those markets without the ban... i.e. Haarlem where I live will be among them.
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.
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.
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.
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 way houses have been turned into a speculatively appreciating asset in much the world is absurd.
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."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 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.
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.
"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.
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.
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?
> 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.
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.
Technically the problem is that the supply is permanently fixed. There is no force on the supply side.
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.
When buying properties will be banned, what would you recommend as an alternative?
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.
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.
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.
- 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.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.
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?
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%.
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".
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.
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.
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.