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Comment by muyuu | Hacker News Reader

Asset rich, when your asset is your home, is the worst kind of rich. Unless you have something else very very compelling to back it up.

If you sell, then say goodbye to your city. If you don't sell, then you don't have this capital, and you still live in a very expensive place.

You can mortgage it for a lot of capital, but this is a poisoned chalice.

Other means to actually realise any of that wealth is to try your luck and speculate downwards, which is extremely risky if that's your only big asset.

Lots of people are "feeling rich" without being realistically able to realise any of this wealth, since they cannot really move away from their city. This is fictitious wealth that constitutes a massive burden to the city and endangers its competitive place in the future.

It will pop sooner or later and its likely to cause massive social problems. It's causing them already even before that happened.

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This is an excellent point.

I work as a real estate analyst in Shanghai, and this same situation is playing out here. Like San Francisco, buying a 2 BR 1,000 sqft apartment in the city proper can cost upwards of US$1M (RMB 6M), though here the GDP per capita is only US$6,000 vs ~$42k in the US. Also, many Chinese feel to own a home before marriage, which is usually accomplished by pooling the savings of parents and grandparents, and assuming one will be in debt until the end of time.

Those that have apartments probably bought them 10-15 years ago, when the price was 10X less. They are, as you mentioned, asset rich, but it doesn't translate into any greater quality of life.

The good news is that the rental market is relatively cheap here. In real estate terms, the cap rate (annual rent / sales price) for buying an apartment is around 1.5-2%, compared to 5%+ even in places like SF.

The market here in China, and the general obsession with real estate, is a deep an interesting topic. The best summary I've found so far is the corresponding section in the book "In Line Behind a Billion People". It's expensive by ebook standards but well worth the time/money for those curious about China.

In fact, it can be even worse with rising property tax valuations. The home you've owned forever might cost you more in taxes a year than a mortgage would be in many places.

My understanding of property tax in SF is that it is based on the price the house was purchased at. This means that the home you've owned forever has had a predictable tax based on that price, and only new owners you sell it to will be paying the higher cost tied to higher property value.

That's all of California, thanks to Prop 13.

http://en.wikipedia.org/wiki/California_Proposition_13_(1978...

Really, the article left out that HUGE issue. If you grew up in the Bay, you are very very familiar with this. I am surprised how many commenters here claim to live in the Bay, yet don't understand property taxes in California. It's a major issue in the state, not quite as big as water rights, but still major.

A good point. To be fair, I've only been to CA 3x and live in Boston.

I'd rather be asset rich than straight up poor!

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