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Comment by graemep | Hacker News Reader

All those are factors.

They also leave out the biggest single problem: years of very low interest rates inflating prices, making it hard for people to afford deposits though. There is BoE research showing interest rates are the biggest factor in the earnings to house price ration.

"Immigrants" also leaves something out. Foreign investors and rich foreigners buying holiday homes/second (or third or fourth etc.) homes are a factor in some places (especially London) - in much the same way that people from London and other big cities push up prices in places like Cornwall.

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Housing seems to be a disaster almost everywhere in the world these days. This makes me think the issue is not a local one (or perhaps there are some traits in all of us as humans that are causing this mess). What is odd to me is that previous real-estate bubbles have been localized. Now, every single place I would consider living has had significant housing price increases/bidding wars, etc.

From an economics perspective, lets assume there was no govt regulation at all. I am not sure if the problem would be fixed. There is a trite old sayings .. "they aren't making any more land" or "location-location-location". But this inelastic supply of land is nothing new. So why is this happening now?

> Housing seems to be a disaster almost everywhere in the world these days

Interest rates have been ultra low (versus historic norms) in the developed world for two decades. And prior to that they were on the decline.

Similarly, the developed world has largely not been building housing in line with population growth. For decades.

We are at the natural conclusion of decades of bad policy and we aren’t going to squeeze out of it in a few years. It will take decades of good policy to fix this and our leaders don’t seem programmed for maintaining good policy for more than a few years until there’s a hint of prosperity and then they fritter it away.

Low interest rates _should have_ allowed builders to build more homes too, but they haven't.

In the US housing supply did keep pace with demand until about 2006. Witness the reversion of prices to historical norms (briefly) after the housing crash. So the response of home builders to interest rates is mixed.

The problem here at least is that many homebuilders went bankrupt after the housing crash and the supply of skills and willingness to build homes decreased for a generation.

House building was stronger when interest rates were low, but still constrained by bad zoning and labour availability.

I hunted for my question and found an interesting Economics Explained video on youtube. That hypothesizes that Baby Boomers essentially voted to change policies to favor themselves as a cohort.

Setting aside the 'how' that's certainly what the outcome has been, at least in the UK.

We desperately need a pro growth government next. Desperately.

Was that the one saying, "you would expect a large generation to be poorer than a subsequent smaller generation because of more intragenerational competition, but actually the larger generation can use politics to favor themselves precisely because they are more numerous?"

https://youtu.be/PkJlTKUaF3Q

The situation is even more extreme in places like Italy where the young are even less numerous compared to the old than in the UK.

It's the political equivalent to deflation. If every generation is smaller than the last, you end up with a gerontocracy and no-change society. To maintain pro-growth policies, you need a critical mass of young people who embrace change and want to grow. Otherwise you get stuck in a positive feedback loop of more and more power and money concentrated among the old which depresses the birthrate.

Yup .. that's the one.

Foreign money is far more of a problem than foreign people.

Notoriously, many newbuild flats end up empty because not many people can afford the rent, and they're really just investment tokens anyway.

Property is like Bitcoin with bricks.

Reality isn't like that, according to a pressure group that says empty homes is a major problem (and are thus unlikely to be underestimating)

https://www.actiononemptyhomes.org/

London, where the main problem is (two people on minimum wage can buy a 3 bed house pretty much everywhere in the country outside the south east) has under 2.5% either empty, in use for short term lets like airbnb, or used for people who have a flat in London and a family home elsewhere.

https://static1.squarespace.com/static/6553693f7d629a133b6a4...

"two people on minimum wage can buy a 3 bed house pretty much everywhere in the country outside the south east" source? Because it doesn't feel like that at all.

https://www.theguardian.com/society/ng-interactive/2023/jun/... take a look at this map - all the bits of Britain that are actually nice to live in are in "can't buy, can rent" or worse.

Prove me wrong, give me an example area?

Also worth seeing that London has about 9 million people, and the south-east has another 9 million. That's 27% of the UK's population in the now-unaffordable area. Throw in some expensive areas outside the south-east (Cambridge, Bristol, seaside resort towns) and that goes up to 30% easily.

Indeed. That's before you've even gotten to places like Manchester, Edinburgh and the like.

Instinctively it feels like about 2/3rds of people live in "unaffordable to buy" areas. Worse it's probably the best paid 2/3rds of the country.

Anywhere in the world demand is where there is supply for wages. Most places just have not succeed matching that demand with supply on the housing. While supply of wages has still gone on... Very often where there is no well paid jobs or even paid jobs the demand is low, so housing is cheap.

Urbanization has been failed. Supply of housing has not kept up with labour around in most urban areas.

Many people are likely to lie about second homes, because their London property will be more expensive so they will want to claim the exemption from capital gains tax for their main residence.

Yes, hard to measure but my feeling is you are right.

Definitely so in London where you also get a lot of very large houses (big enough to be converted into multiple flats) being bought by the rich and super rich. Talk to someone in a business linked to luxury London housing and see how long phrases like "family office" take to come up.

> Foreign money is far more of a problem than foreign people.

Maybe in the UK, but in Canada we have the same problems (larger by the looks of it) and our government blocked foreign money with zero noticeable impact.

I think foreigners are a scapegoat for the cumulative impact of decades of bad government policy at all levels of government, including bad monetary policy.

I think the UK is very different, London in particular. The most expensive parts of London the most: https://www.standard.co.uk/business/london-housing-market-fo...

Those numbers do not count the people who moved to the UK (mostly London) to avoid paying tax under "non-domiciled" exceptions which the government has promised to abolish next year. The main opposition party has endorsed this policy AFAIK so things should start changing from next year as far as those go.

I think we can add "high interest rates" to the above list. That is a symptom, not a cause. If we built more houses it wouldn't matter anywhere near as much.

We can't have a situation where demand is outstripping supply to this extent and expect our economy to grow. We need workers able to live somewhere near where they work, we need them to not have a mortgage so high that they feel unsafe in moving jobs, starting a business or going freelance. We need folk with disposable income to spend on other sectors besides overheating the property market.

All this promotes growth in our economy, housebuilding also of course generates work for builders, electricians, trades, road designers, rail companies etc etc

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