12 Reasons Houses Cost More

[Zardnaar]

Interesting article. Obviously not all of these will apply in your country. Affordable housing is a problem in a lot of countries.

https://i.stuff.co.nz/business/1181...or-higher-house-prices-than-your-parents-paid

Tldr version.
1. Lower interest rate.
2. Population growth/immigration
3. Double income households
4. Higher construction costs.
5. Improved credit access.
6. Save or starve
7. Foreign house buying.
8. Couples divorcing
9. Air bnb.
10. Foreign students
11. Land availability
12. Housing shortage.

 

[Commodore]

I think both 7 and 12 could be greatly mitigated with some protectionist policies that keep property management companies, both foreign and domestic, from snatching up all the houses and killing the dream of homeownership. I would be in favor of a law that says the owner of a house must also be the primary resident of the house. Also limit the number of homes any entity (individual or corporate) can own to one. Exceptions to this would be banks that repossess homes, but they would be given strict time limits to resell those homes.

 

[aimeeandbeatles]

I would be in favor of a law that says the owner of a house must also be the primary resident of the house

That would also mitigate the AirBNB problem.

 

[Zardnaar]

I think both 7 and 12 could be greatly mitigated with some protectionist policies that keep property management companies, both foreign and domestic, from snatching up all the houses and killing the dream of homeownership. I would be in favor of a law that says the owner of a house must also be the primary resident of the house. Also limit the number of homes any entity (individual or corporate) can own to one. Exceptions to this would be banks that repossess homes, but they would be given strict time limits to resell those homes.

They passed a law to mitigate 7. At one point you could get 15-20% returns tax free (no capital gains tax).

Capital gains tax was looked at but coalition party+polls torpedoed it.

 

[Birdjaguar]

In the non tech hub cities many housing issues will go away as boomers move out of their current homes and into retirement homes or assisted living situations. Millions of homes will go on the market in the next ten years. Boomers will ask more than the market will pay. It will be a buyer's market in those cities. In the hot markets like Austin, Bay area, Seattle, Boston Raleigh/Durham etc. housing will be tight and prices high. Opportunity knocks Millennials!

 

[Josu]

Is not present Real Estate Speculation present in your contries? I comment it because it is not in the reasons.

In my city there is about a 5% of houses that are no being used nor are in the market due to owners that are awaiting higher prices

 

[Zardnaar]

Is not present Real Estate Speculation present in your contries? I comment it because it is not in the reasons.

In my city there is about a 5% of houses that are no being used nor are in the market due to owners that are awaiting higher prices

Yes it's a thing but probably falls under one of those 12 reasons.

Probably number 1. I think something like 40000 homes were empty in Auckland. Brothers suburb you can tell as free community papers don't get collected daily.

That was a year or two ago though.

 

[Samson]

It may be a particularly UK thing, but Nimby planning laws have a lot of blame. Many people around me are very against any house building near them, so vote for politicians who will prevent more housing being built near them. I am convinced they are making a mistake long term, but have to live with their decisions and expect to spend my life renting at ever more exorbitant rates.

 

[PhroX]

The reason houses cost so much is because for some weird reason they're considered an investment instead of a basic right....

 

[EnglishEdward]

I would add in:

13. Higher Building Standards.

By this I mean, adding materials to provide fire resistance and better insulation for low energy use, remember
houses were not traditionally built with solar panels, and heat exchangers cost more than gas burners etc.

This is to me separate to having higher construction costs for very similar buildings due to labour rates and profit taking.

14. Global Warming

Much land is liable to flooding. This means that either it should be unbuilt upon thereby reducing the land available, or that the building there needs to be done in a more expensive way to survive flooding.

 

[GoodEnoughForMe]

The reason houses cost so much is because for some weird reason they're considered an investment instead of a basic right....

Yes this. A house is the biggest purchase the vast majority of people who make it will make, so there's then a massive motivating factor to continue to support things that inflate your major asset's prices. It's a ridiculous system in retrospect. Tying our wealth to our literal shelter has warped our motivations badly and will continue to do so.

As for the list, 12 is a lot higher here (US) depending on the market (Baltimore has basically half the amount of houses it needs), and with the lack of public transportation, "houses too far away from work thus inflating the ones in cities" is a thing too.

 

[Commodore]

The reason houses cost so much is because for some weird reason they're considered an investment instead of a basic right....

You have to remember that when you buy a house you aren't just buying the house, but the land it sits on as well. So while you can argue that access to housing is a basic right, land ownership is not. And land ownership shouldn't be considered a basic right, because that would create a mess for the government as they try to sort out who the legitimate owner of a piece of land is and how much land should be allocated to each citizen.

 

[GoodEnoughForMe]

We already have a mess of speculators sitting on land, housing shortages, and out of control prices. There is so much land available to provide public housing with, or ways to subsidize new construction. That's not an issue at all.

 

[rah]

Yes, they are a limited commodity so speculation is always going to happen.
Gentrification is the natural course. All it takes is a few to get it started. (unless the area is too undesirable)

 

[AmazonQueen]

I'd add lack of social housing.
Social housing adds to the housing stock and since it provides an alternative to private housing prices have to be competitive.

 

[rah]

You have to take care with social housing. Chicago first attempt turned into the 'projects'. Vast building projects where only those that had to lived due to the dangers. They have all since been torn down.

 

[MaryKB]

Houses are also much, much bigger than they used to be. Here's a quick little chart I put together, comparing now to 30 years ago:

(Please do note these are for the United States)

At first glance, house prices look like they've gone up 163% in 30 years (wow! right?) But consider ...

In 1989 buying a new house was just about 4 times your family's income, while this year it's almost 5 and a quarter times. BUT houses are much larger. When you look at how much you pay per square foot, and compare to income, prices are exactly the same.

You're paying more today, but you're getting more too. And that's just square footage: remember back then they didn't all have the same things we have in our homes today. And also remember, mortgage interest rates back then were 3-4 times what you can get now, so you really paid more of your money back then.

 

[Samson]

You have to take care with social housing. Chicago first attempt turned into the 'projects'. Vast building projects where only those that had to lived due to the dangers. They have all since been torn down.

Sure you need to think a bit about how and where you build them, but when the option is homelessness for some, insecure housing for many and a far higher percentage of the national economy going on somewhere to live than ever before for all then doing something has to be better than doing nothing.

Houses are also much, much bigger than they used to be. Here's a quick little chart I put together, comparing now to 30 years ago:

(Please do note these are for the United States)

View attachment 540833

At first glance, house prices look like they've gone up 163% in 30 years (wow! right?) But consider ...

In 1989 buying a new house was just about 4 times your family's income, while this year it's almost 5 and a quarter times. BUT houses are much larger. When you look at how much you pay per square foot, and compare to income, prices are exactly the same.

You're paying more today, but you're getting more too. And that's just square footage: remember back then they didn't all have the same things we have in our homes today. And also remember, mortgage interest rates back then were 3-4 times what you can get now, so you really paid more of your money back then.

Surely the thing is that these houses you are comparing are not the same. In 1989 the houses were smaller, but they also were closer to the city. I will wager that many of the smaller houses from 1989 where you can reach the jobs easily are selling for more than the McMansions in the suburbs or exburbs that are being built today that you have to drive most of an hour to reach work.

 

[rah]

Yeah, but you can mitigate some of the issues by spreading it out. Which is harder because of NIMBY thinking.

 

[AmazonQueen]

You have to take care with social housing. Chicago first attempt turned into the 'projects'. Vast building projects where only those that had to lived due to the dangers. They have all since been torn down.

You do. Our own inner city tower blocks were a disaster.
OTOH a lot of council housing was sold off in the '80-90s and has steadily appreciated in value since.
If councils built houses and small apartment buildings and made sure proper services like schools, parks, surgeries and public transport were provided from the get go it could work.
It just has to be homes people want to live in rather than battery farms.