[eaxix]

> The role of investors in the economy is ultimately to finance new development. ===> False. The role of investors is to make money.

No. The market pays investors if they managed to allocate capital well, and takes away their money if they happened to misallocate it. The investors take on a risk of loosing their money if their investment goes bad. This is how capitalism is so successful. Investors who make good decisions grow richer and that allows them make more good decisions on how to allocate capital, creating a positive feedback loop. Investors who make bad decisions go broke and that prevents them from misallocating any more capital.

> If you build more, rents will go down. ===> In theory True. In practice self builds lower the pricing. The barriers set by bureaucracy for the sake of bureaucracy are the problem and they cause property prices to go up. EDIT: Restrictions set by bureaucracy is what creates artificial scarcity(think diamonds market)

I'm all for small government and cutting down on bureaucracy.

> As a sidenote(IMHO): Ideally, property ownership should be limited to 1/+18 year old to prevent/reduce speculations. Maybe 2 if we're talking about adding a holiday home(yeah. I know it's a strech). Companies should not be alowed to own residential properties unless they are a developer. In that case, they can own the newly developed properties for up to ?5? years.

That's exactly the kind of regulation that prevents efficient capital allocation and leads to increased pricing.

[White_Wolf]

"and leads to increased pricing. " ==> I can see the effects efficient capital allocation and no limits on properties owned had on the price of properties in the past 20 years.

Don't take this the wrong way mate but this is exactly the sort of mentality that led to this situation in the first place.

Keep in mind this comes from someone that owns 8 fully paid off flats (going 9 next year) and a good sized house(enough for a family of 6-7) in the country side with 50HA of arable land+forest. I am not complaining about the current laws or that it bothered me in any way. I'm saying that current laws+ speculation are keeping youngsters away from owning a property in a reasonable ammount of time. The way I see it, they live with a chain around their neck for 1 lousy house with cardboard walls.

"The market pays investors" ---> Stakeholders pay investors for sucessful speculation(in other words - investment)

[eaxix]

I see.

I am a part of the young demographic you're talking about, so I have experienced the (compared to my parent's time) inflated prices first hand. I only own one investment property (in a large city) so far and it's mostly debt.

If you scroll down a little bit you'll see that in another comment I have written that I think the high prices of today are caused mostly by the influx of young people into cities. It is for the most part simply a case of having too many people wanting to live in a limited geographic area. In particular, they want amenities and jobs which tend to be concentrated in big cities.

The only way out is to either build more (with much higher density) increasing the capacity of existing cities or to revitalize small towns as hubs for remote workers with all the amenities they want. As it stands right now, even with remote work on the rise, myself included (I have a fully remote job yet I choose to live in an expensive city), not too many people my age would want to live in a small town their parents or grandparents may have happily lived their whole lives in.

The reason I believe that is the case is that rents are expensive too. Speculation may affect property prices, but it does not lead to increased rent prices. That is barring a few extremes where people buy housing for investment and don't rent it out or live there, which fortunately doesn't seem to be too common -- just take a walk outside in the evening and you'll get a good idea of how many houses/apartments are lived in. In general property tax is designed to prevent this.

Bad policies like rent control may lead to inflated rents (cheap rents for original residents only mean much higher rents for everyone else), but you do see high rents even in cities without such bad policies.

As a landlord, I charge market rent. I'm happy to lower it if I have trouble finding a tenant, as even an absurdly low amount is much better for me than having the property be empty -- I have a mortgage to pay. So far I haven't had to. In fact, the current tenant offered to pay me more rent than what I had originally listed the property for in exchange for me making some minor improvements to the property! I was more than happy to oblige.

--

There's one more factor making the situation look worse than it is -- low interest rates. People often calculate how many average annual salaries it takes to buy a place and compare that with the past, but I believe that is not the right metric to look at.

The right metric to look at should be yearly interest as a percentage of one's annual salary. In theory, if the interest rate is cut in half (i.e. from 2% to 1%) you'd expect home prices to effectively double since one can pay the same amount of interest to own a place twice as expensive.

This doesn't quite happen in reality, because when home prices rise, even when accompanied by lower interest rates, a mortgage usually requires a down payment which does scale linearly with the house price along with the principal you are required to pay every month.

You'd be right to point out that this does disproportionately affect younger and less wealthy people, since the more wealth you have, the less you have to rely on traditional mortgages -- you could borrow against your stock portfolio for example, and only pay interest, in which case the interest rate being cut in half indeed does let you own twice as much house with the same cash flow. Of course, you do need to be prepared to weather the storm that may come should the interest rate start rising again, which is precisely why it would be too risky for banks to let the average Joe do something like that -> hence a down payment and monthly principal repayment is required for most mortgages.

I'm not sure what's the best way of solving this. Ideally, your average young person should be able to buy twice the house when the interest rate is halved, but they do need to be shielded from the risk of the interest rate suddenly going up somehow. The government stepping in as a guarantor would likely lead to moral hazard deforming the market which I'm not a fan of. I'm of the opinion that interest rates are mostly determined by the broader market and large secular trends like demographics and technological advancement, as opposed to central bankers, so I don't think this can be solved by attempting to manipulate the interest rate either.

Overall I think the first problem of housing scarcity which is reflected in rent prices is a much bigger issue and solving that would help lessen the effects of the second one.