People like to talk about housing prices as if it's just a simple supply issue which can be fixed by building more houses, but it doesn't seem that simple to me.
Sure, there might be a lack of supply... for speculative investment. But in terms of there just being enough houses for the population to /live/ in, aren't we already there?
There's no cap on "need" for housing investment, if it continues to be profitable, people will keep investing in more property - you'll never reach a point where you've built "enough" for prices to get under control.
Nobdy wants to lose money leaving their real estate investment empty. Vacancy rates are low.
If we had "enough" homes it wouldn't be profitable to speculate. Most peope agree we're in a housing crisis. We need to be focusing on making it legal to build more housing rather than worrying about if people are making money owning homes.
I'm not saying we shouldn't be doing those things (making it easier to build new houses). I'm just saying it seems naive to think that that /only/ doing that will make houses affordable.
> Nobody wants to lose money leaving their real estate investment empty. Vacancy rates are low.
People do leave properties empty - it's easier to do in a rising market when it will still make you money via capital gains (and leveraging equity to purchase further properties).
It's worth keeping in mind that industry reported vacancy rates are typically the proportion of properties that are on an agent's books and are currently vacant. Many properties are not included (land-banked, holiday homes, AirBnB, those currently being renovated, up for sale, etc).
I live in a house that is currently valued at NZD1.7M. This same house was purchased for NZD0.56M 12 years ago. That gain totally dwarfs the amount of rent the owners could have collected in that time.
Consider NZ.
According to Statistics New Zealand in 1991 there were 1,307,000 private dwellings and 1,252,600 households. A difference of 4.16%.
In 2017 there were 1,855,500 private dwellings and 1,734,800 households. A difference of 6.5%.
During this time household sizes decreased and house prices increased far in excess of inflation. In 1991 the average house was NZD173,000 (in 2016 dollars). In 2016 it was NZD495,000. Today it is over NZD1,000,000 (or about NZD900,000 in 2016 dollars).
Consider Australia.
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. Desirable areas have higher vacancy rates, even approaching 20% by their reckoning. This is the opposite of what you would intuitively expect in a naive supply and demand equation.
Consider the UK.
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).
A speculative boom creates extra demand. As Ireland discovered during the GFC, when that investment demand dries up, the empty homes (and over-supply) are revealed. This will happen again and it will be when people can no longer take on more debt (most likely due to rising interest rates).
A big part of the problem is distribution, a home in Akron isn’t as valuable to society as a home in SF/NYC. People are locked out of opportunity (which doesn’t just enrich the individual but broader society though taxes and more efficient labor) through lack of housing.
I used to live in Akron. The tire, rubber and chemical industries are big and have a lot of high paying jobs. This is not even taking Cleveland into account which is a massive medical hub. Looking at just the city is misleading. You need to look at the desirable suburbs between Akron and Cleveland (ex. Hudson). They're massive, expensive homes there.
I understand what you're saying but Akron probably isn't the most ideal example for your comparison.
Akron is not devoid of contributions to industry (the university has cut some departments lately)
-signed, child of two UA alums who went to Caltech. I know another UA alum from my HS (https://www.linkedin.com/in/stanwang/) who has done quite well building venture backed companies.
I don’t doubt that many have achieved great things in Akron, but was rather arguing that the relative level of opportunity is lower in Akron (median income 23K) than SF (54k) or NYC (32K). The typical person is more economically productive in cities like NYC or SF.
That’s not true. There aren’t houses in places people wish they could live on their salary/savings. Plenty of affordable houses in many places if people were willing to live there.
