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Comment by WalterBright | Hacker News Reader

> the gov has to step in and bring real estate price under control

No government has ever managed to repeal the Law of Supply & Demand. Because it's The Law. Communist countries never succeeded at that, either.

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If it had enough political will do, the government could build more supply and reduce prices, no, like in Hong Kong and Singapore? There are a whole spectrum of government-directed solutions to try keep prices down that comply with supply and demand.

Building more supply in order to reduce prices is not repealing Supply+Demand, it is acknowledging it.

I was backing up the OP talking about the government stepping in and bringing prices under control, which for some reason you assumed must have meant violating supply and demand.

"bringing prices under control" with the government usually means price controls of some sort, which is denying S&D.

Denial of the Law of Supply&Demand is about as effective as denying the Law of Gravity, or passing a law that π=3.

A couple of obvious examples of failure are rent control and anti-gouging laws.

Regulation can influence supply and demand. Raising interest rates lowers demand (I would say most significantly it lowers speculative demand).

Real estate prices today have little to do with supply and demand. Why else have real estate prices grown hundreds of percent all over the developed world in the last 3 decades, despite relatively low population growth?

Like claims of perpetual motion, if it looks like Supply&Demand is not applying, then something is being overlooked.

In this case, I suspect your facts overlook the fact that population growth is not even across a country. Population growth has grown a lot in places that are more attractive to live in, and declined in areas that are less attractive. For example, in Spain, I read about many abandoned villages going for a song because the population moved to the big city.

In the US, population declined in Detroit and rural areas, and grew in the cities. Housing prices followed those trends.

You bring up a good point. But there are other important reasons. Particularly the availability of cheap money for speculation in the housing market. The reason for this is the historically low interest rates.

What happens when the interest rates go back up?

Let's say they go from < 1% to > 10%?

If we're lucky, the market recalibrates on a more affordable level. Workers start seeing real wage increases. Speculation and stimulus gives way to real economic development.

If we're unlucky, the interest rates are not allowed to increase for fear of falling house prices.

That just means construction has been made illegal. There's no reason "cheap money for speculation" would be easier to get than "cheap money for construction" otherwise; speculation is riskier!

And when interest rates go back up, it gets even harder to finance construction.

There is money for constructing large expensive apartments who people who can acquire a bank loan would like to buy as an investment. There is little money for constructing cheap small simple rentals, because rentals are paid by wages, not inflated loans. But this is the segment where the demand is highest.

The cheap mortgages distorts the price signals, making the market less efficient.

This is a great question, I recently visited Australia where property prices are absolutely ridiculously inflated, they appear to be in a slight reversal currently; However, people are borrowing and paying millions (AUD) for shacks, just because they're near some water...yes the area is nice but these are old houses which are not really near public transport, good schools, hospitals or other amenities. Some of them I saw were built in a flood plane.

Why? What's driving this? Was it the historically low interest rates, which have now just rocketed in Australia back up to > 5% ?

Who will fuel the next property boom to pay for it? Feels almost like some apex has been reached and it's going down from here.

Especially as like others have said, it doesn't seem like the developed world is growing rapidly enough to sustain the demand. Immigration might help fuel more demand, but then pressure is taken away from real estate elsewhere, which would incentivize people to stay put, besides, it's not like immigrants often land in the developed world with 2 million dollars to spend on a shack in a remote location.

It's fascinating to say the least. Interesting times ahead for property speculators and I guess, everyone...

I always felt like calling the communist countries communist was like calling our republic a direct democracy. Maybe in spirit I guess, but not exactly in practice. You're in California right? What is the rent control/housing like where you are, if you don't mind my asking?

I live in Wa state. While we don't have specifically rent control, there are all kinds of other regulatory interferences with landlords. For example, one is that the tenant is not responsible for damage to the rental from domestic violence, the landlord is. Seattle will provide free lawyers to tenants who want to sue their landlords. Seattle made a lot of extensions to the rent moratoriums. There are requirements that someone building a new apt building must also build some "affordable housing" units.

All these things do is force rents higher.

https://www.seattle.gov/housing/renters/know-the-law#renters...

Communist countries did succeed because they controlled demand. Although I don’t think people would like the solution that much, e.g. three families living together in a 3 bedroom apartment, one family per bedroom.

No, they didn't. They just had supply&demand based on how long you were willing to wait, the black market, barter, privilege, and a market of favors and counter-favors.

Also waiting lists. Everybody gets their own apartment… in 20 to 30 years.

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