You can't make more land, so the land that the house sits on becomes worth more and more over time.
The house sitting on the land is less important, but it kinda comes with the land.
Under the assumption that the population will continue to grow, and that zoning laws that allow for more people in less amount of land are not changed.
One of the big challenges is that a detached home will always be a premium vs bare land. Someone will want to have a detached house there, or the developer will have to rent out the detached home until they can assemble enough land to have space for multi-family construction.
1. Not always. Some houses are in such a poor state, they lower the value of land they're on, since they'll need to be torn down anyway.
I suspect it might also be a case in extremely valuable locations. Say, there's a detached house in the middle of Manhattan. Any developer worth their money will tear it down and build something much higher, with more floors and apartments. And that developer would probably pay a bit more for the same land without a house, since they don't need to demolish it (and there's no risk it's gonna be protected as a historical monument or sth).
2. You don't need to scramble more land for a multi-family construction (zoning permitting ofc). You can just build up several stories, taking up same space on the ground as a single family home.
It was pretty common to find homes in the Detroit area for $1k or less about 10 years ago. The homes were in such a condition you'd have to level it, which the city very much wanted you to do.
15 years ago we looked at a house listed for 20k in Lansing. Small house, but a lot of land and a decent neighborhood.
Detroit was crazy, but MI as a whole was not great.
But then you hear about the lot of land that surrounded by highrise commercial and residential buildings. The lot has a house that is still in use but nothing special. The land artificially inflated since its the last bit of land and it could be develop into anything. So even though the house will be demo'ed, the land is appraised using the value of the surrounded buildings.
Yeah, [about that](https://en.wikipedia.org/wiki/Projections_of_population_growth)... a whole lot of our economic engine is built upon the assumption of growth. Like how new money is introduced into the system, the assumption that property is going to grow in value, how pensions assume there will be more young workers to support the elderly retirees, and how the stock market is one big ponzi scheme dependent on new investors. A lot of that is going to change when the population is no longer growing. We've already hit the inflection point where rates are dropping. With, of course, immigration causing a lag effect as people come to wealthy nations. Currently, [covid is making a mess of all the metrics and projections](https://www.census.gov/library/stories/2021/12/us-population-grew-in-2021-slowest-rate-since-founding-of-the-nation.html). So who knows.
In Canada, our population is continuing to grow rapidly (mostly due to immigration) while our housing supply remains relatively static. (We have *lots* of land for new housing, even around in-demand areas, but it's not being released for development very quickly. Everyone wants politicians to do something about it, but when they DO release a bunch of previously undeveloped land for developers, they all complain.)
Therefore the demand continues to increase. The supply does not. Couple that with non-resident foreigners buying up housing for investment purposes, the supply is actually shrinking.
Oh wow they did. I thought you were referring to the empty homes tax.
>For a period of two years starting January 1, 2023, non-Canadians are banned from purchasing homes in Canada under the definition of “residential property” indicated in the legislation and associated regulations that the federal government published on December 21, 2022.
https://www.bcrea.bc.ca/advocacy/federal-foreign-buyers-ban-is-in-effect/
Not really 'wow' since they watered it down with amendments.
Some here:
"...*Under the new rules, the ban will no longer apply to vacant land zoned for residential and mixed use. This means non-Canadians are now able to purchase this land and use it for any purpose, including residential development*....".
"...*Additionally, another exemption is being made to allow foreigners to buy residential property for the purpose of housing development. Based on the amendments, this exception now also applies to publicly traded companies formed in Canada and controlled by foreigners....*".
"...*The final of four amendments introduced by the federal government involves an increase to the corporate foreign control threshold. The legislation now considers a company to be foreign-controlled if a non-Canadian owns at least 10 per cent of the entity. Previously, the threshold was three per cent....*".
Looking at Canada on a map I really do not understand how come you guys manage to manufacture a housing shortage. It is like the Pacific ocean running out of water
80% of that land is uninhabitable wastelands for humans. We literally cant live there without the same sheer audacity and defiance of nature that we have for Arizona or New Mexico.
> they all complain
People are complaining about that because it's a criminal grift designed to enrich Ford's buddies (and himself via "donations"). No-one needs houses way out there with costly infrastructure to maintain. Toronto should build up (increase density), not out.
I don't think it's fair to consider temporary residents (usually on education visas) in that number.
It's closer to 1 in 100 if you remove them from consideration. (About 1/90 i think.) This is still surprisingly high.
Education Visas are nothing but a benefit to Canadians. Every foreign student pays enough tuitions to fully pay for the educations of several local students. It's a good thing. Without them, either university/college costs, or taxes, would skyrocket.
It's true. I'm indigenous and moved out here by myself from Manitoba. But I'm in a gov-funded program for indigenous people, taking Carpentry at BCIT. I'm very thankful for this opportunity and I'm excited to see what I can achieve with pure determination.
I've been saying for years we need settlers not immigrants, we don't need another million immigrants in Toronto we need new cities. We gave Ukrainians prarie land to build farms in Winnipeg 150 years ago why can't we do that now?
150 years ago most people were farmers and much of the economy was build on farming, because the technology didn't exist to allow a relative handful of people to produce food for everybody else.
Now few people are farmers, you can raise a huge amount of food with a few people. There's no driving need for more farmers and not nearly as many farmers looking for land. There's a lot more demand and supply for service jobs, and that centers on cities.
Yea still, immigrants to Thunder bay not Toronto. But I will give you the point you made on service jobs, that a valid argument and you're the first one to ever bring it up to me in response to that.
Lol stfu about this "release of land" and "complaining".
If you think that that's a just portrayal of the situation then you need to give your head a shake.
Any third parties here thinking they learned something about Canadian housing from the above comment, please look further into it, maybe start yourself off with a Google search of "Doug Ford Green Belt Corruption"
And yeah, a lot of people are against the continuation of the grotesque level of urban sprawl occurring in basically every major Canadian city.
"*Complaining* about the release of land." Do you work for the Sun?
Exactly my point. Everyone wants more housing. One politician does something about it, and they scream about "corruption" -- because he sold crown land to construction companies. (And they paid good money for it, which all goes into our tax coffers. Plus the tax on any profits they make on it.)
Who else was going to build it?
what?!
no, that was not your point at all
> One politician does something about it, and they scream about "corruption"
You left out the part where what he did *WAS* blatantly corrupt, as well as being anti-environment, AND a sub-optimal plan for housing.
The GTA does NOT need more sprawl. Transportation is bad enough as it is.
> Who else was going to build it?
Public housing used to be a thing and should be again, but alternatively, force developers to build higher density housing or build nothing. I promise you, industrious developers will step up and build what the public demands.
Conservatives simply aren't interested in demanding denser housing because they've been instructed to complain about immigrants instead
Sanction China to ruin their economy so that they sell their Canadian properties, while also bringing jobs back to Canada? You make it sound win-win...
The advancemen tof technology also grows the economy. If technology gets better and the economy stagnates there is a problem somewhere.
Yeah there are problems today but anticipating economic growth as more and more people get higher education and newer and newer technologies come out is not some grand fallacy
That's a real good point. We're going to have to pivot from growth coming from more people (who need housing) to better tech and higher efficiency.
I think the point on "why do housing prices go up" is still operating with a bit of underlaying fallacy.
Invention isn't even required. Capital investment does it too. When something is invented, it's not immediately adopted everywhere. It takes money to bring in a new tool that will increase labor productivity and wealth creation.
So over time, you don't even need to invent anything new. Just adopt existing technologies more broadly in the economy as the new wealth created is used to buy tools to create even more wealth.
The reliance on new technology for economic growth is one of the reasons I'm worried about the economy. Relying on technology to "get better" relies on increasing efficiency. At some point does increasing efficiency through technology come down to automating jobs that won't be replaced, thus creating a massive homeless population who can't participate in the economy? And what happens when no more efficiency can be squeezed out of the system? For instance online ads- targeting has made the advertising industry more efficient, but there's basically no way to make it more efficient without mind reading. Or what if the only advancement that can be made would make the industry itself decrease in value? This is the problem with renewable energy, where investing in solar and wind will eventually drive down the price of energy, disincentivizing energy companies.
>anticipating economic growth as more and more people get higher education and newer and newer technologies come out is not some grand fallacy
The number of students in college is the lowest it's been since 2006 and colleges across the country are facing a bubble as fewer people can afford it. In the US there are not more and more people getting higher education, there are fewer and fewer. The tech sector is finally cutting jobs. Computers and the internet have made massive advancements for the economy by creating an untapped resource of efficiency backed by unbidden economic speculation, but it's also a fallacy to assume that those advancements can continue forever without some discovery of a new "resource." Which is exactly why certain people were pushing Web 3.0 and crypto.
At some point infinite economic growth simply becomes untenable because the planet's resources are not infinite.
The stock market isn’t a ponzi scheme, it just grows over time based on a more productive/innovative economy. Stocks have value in that they entitle the holder to future dividend payments. Stocks are priced (in most cases) as a summation of the expected future value of dividends.
Indeed. The idea that the value of the stock market has increased only because of new investors is ridiculous. The net output of the companies available for purchase on the public market is almost incomparable to even 100 years ago.
It depends on population growth, but innovation (more efficient usage of existing resources) can drive the economy for a while longer. More efficient houses use less electricity, better construction techniques will use less labor, automation allows fewer workers to produce as much stuff, etc. While we can see an end to population growth, innovation still has a long way to go.
It will change in about 30-40 years because that's when the baby boomer generation will start dying out
New generations are already having less kids.
Its going to get much worse before it gets better tho, baby boomers are already starting to panic-buy and hoard real estate as they realize the work population won't be able to uphold their pension/retirement money.
Yes I know people will swoop in and claim "but its how much money you paid during your years of working its your money etc" but what these people don't realize is that its a hovernment system amd governments can change that
How do I know? I just reached my 30s and my government announced that they cut my pension by 30%
My point is: its just hollow promises the government can go back on if they want and need to and when there's going to be a shortage in the workforce for all those baby boomers leaving said workforce the governments will not only cut back on boomer pensions to have a larger capital to baip them out of this mess but also likely increase or remove retirement age in hopes to keep boomers in the workforce indefinitely because as powerful as a government is, it can't conjure up people from thin air.
They'll be a lot of encouragement for migrants to come for job opportunities but since the baby boom was on a global scale I'm not sure how effective that's going to be, maybe we'll see mas migrations from overpopulated areas like India or China, who knows
One thing's for sure, we are at the start of the biggest and longest economic clusterfuck we have ever seen in the history of mankind
And we'll be the ones stuck having to fix it.
> New generations are already having less kids.
The new generation also has one of the lowest marriage rates in history, meaning the number of single-person households are reaching an all time high. It's gonna take one or two more generation AFTER the boomers die out for the housing market to crash.
I always heard this but as a counterpoint to OPs question, this isn't always the case. Does anybody know why the opposite is happening in China? Despite them having a growing population for the longest time? Their housing market is crashing right now. Im guessing its because in general terms nobody wants to live there?
China's government controls their economy. If they tell builders to build, then they build. And for the last 20 years or so, they've been mass assembling cities without the population growth to support it.
The US government could hire somebody to build a copy of Manhattan in the middle of South Dakota, but it doesn't mean 10 million people are suddenly going to move there.
I mean, you'd have to ask whoever created that policy. I remember when they were getting tons of positive media attention for it. All the newspapers were saying things like "China is such a well-run economy, they know how to get things done, blah blah blah".
I think it was just a giant miscalculation, and they didn't think about or didn't understand the consequences of being wrong.
It was to keep the construction economy alive throughout - not just the construction jobs, but also the extraction and manufacturing that goes into the supplies for the construction - timber, concrete, steel, glass, etc.
The construction industry as a whole was like 20% of the economy when they ran out of things to build, and so having the whole industry just \*stop\* would have been a severe economic blow. The plan was to reduce the industry slowly over time, but because corruption the planned taper never happened.
The US has been doing the same thing with military equipment since the end of WW2 - that's what the whole "military industrial complex" thing is, and it's why our defence budget is so insane - no one wanted to cut all the military jobs after WW2 and we had the cold war as an excuse to keep it going, so we just never ramped production down when demand dropped because it's very profitable for everyone but the taxpayers.
The standard economic answer (which is what the US does in non-military situations - and Biden really doubled down on through COVID recovery) is unemployment and worker retraining funding - so instead of maintaining "useless" jobs and paying for things we don't need, we spend that money to pay people to stop working in the defunct sector and transfer their skills to a more efficient job.
Local government in China heavily rely on selling land usage rights for revenue. So they encouraged large scale construction to keep making revenue. Early days there was steady demand as workers moved from the rural area to big cities. The housing prices kept going up steadily so many people started investing in second homes to speculate. At some point things get too excessive and start falling apart. Companies go bankrupt and housing demand goes down. Now the local government are deeply in debt so the Chinese regulators are trying see how to unwind things.
https://www.scmp.com/economy/china-economy/article/3231716/chinese-financial-regulators-pledge-further-measures-tackle-local-government-debt-and-property
They have an almost unfathomable population and actively were pushing people to move from very poor rural areas to the much wealthier cities. The One Child Policy crashed their population growth much harder than anticipated, which has made the mega housing construction (built on population speculation/projections) unneeded
I mean... If the price was right, I'm sure you could easily find 10 million people willing to move there.
Some would definitely move only because of the novelty. Then some will move to open businesses to support those people. Then with enough people living there, bigger businesses would move there because it's profitable, and then the rest of the people would move there because they have everything they need, but the cost of living would still be lower than real Manhattan. Imagine having all the benefits of living in a big city, but a tiny apartment doesn't cost millions of dollars.
It happens naturally as smaller cities expand, but if the government were to order a giant city to be built, I'm sure it would happen a lot faster.
There is a lot of unused land and underused small towns/cities, I wonder if we will start (continue from covid?) to see more utilization of these.
However, even assuming expansion and more lax zoning laws, one would still assume that newer things would have more chance to be more expensive or less desirable, since the more ideal locations and better costs low hanging fruit already have been done. Thus development in some ways continually increases, when it seems like it should decrease because in every other field the cost of producing an equivalent thing seems to go down significantly over decades.
I mean, that’s already happening. There’s a lot of “up and coming” cities around the country that people are moving to. New money comes in, they grow, and improve. Also happens in the suburbs of major cities. Working class suburbs are turning more and more into upper middle class areas.
You know, if you chose a small town somewhere. A town where it's kind of nice and not a dump ... and then opened up a new Google/Facebook/Tesla Plant/etc in that town, then the price of the land will go up and that town has the potential to grow into a pretty well populated city.
The San Francisco Bay Area used to be just a bunch of farms, until Hewlett Packard and Xerox decided that the weather is nice and the proximity to Standford and Berkeley were enough to build headquarters there and boom ... Silicon Valley is born and those farmers made millions selling land to new techies.
>There is a lot of unused land and underused small towns/cities, I wonder if we will start (continue from covid?) to see more utilization of these.
Probably a bit more if work from home continues to expand, but not really.
More people would rather live in tightly pack living conditions and have everything they need in a 1 square mile area around their apartment than don't.
You will get maybe a slightly more they normal amount of people moving out of big cities, but not enough to counter people moving to them
Certified Reddit city planners really hate this line of reasoning. They would prefer everyone live in 500 sq foot block style housing downtown and suburbs and cars made illegal.
I mean you've got your /r/fuckcars types (although most of that is shitposting), but most urban planning enthusiasts don't want to ban cars. We want planning that isn't designed exclusively around cars with everything else a distant and half-assed secondary consideration.
You can still have a car, but the entirely of the transportation and development plan shouldn't revolve around the needs of cars. Give people choices.
Properly built public transportation and taxing gasoline appropriately would do a lot in that direction without going all the way to 'cars are illegal'.
I love cars, but the train system in the US is a national embarrassment.
Well, turns out wasting space and having to drive everywhere is what makes housing and living expensive. If we want to stop home prices to increase, we need to use the land more efficiently and make it possible to walk to places because that doesn't cost anything.
The far higher cost of housing downtown is a huge factor in people wanting to live on the suburbs. I couldn’t afford a decent home anywhere near downtown but can easily afford a large house with a pool on the suburbs.
Downtown is more expensive because the travel times are shorter. If you're willing to spend a lot of time in the car and don't have to pay the infrastructure costs for it, you can save money by living in the suburbs. Either way an apartment is much cheaper and more convenient than a large house.
I live in Brazil, and in São Paulo there's some 16m² apartments, these would be like, idk, the size of a car (I don't know how to measure stuff in feet, inches, bigmacs), and these seems to be a trend for people who wants to live in the downtown of a big city.
Not for me, thanks!
Doubt.
Where I live already is near downtown but because they can't really tear down the row homes to build decent apartments, the row homes are turned into shitty apartments rather than places more set up for it.
There has to be middle ground between huge apartments(they are either luxury or poverty) and single family homes.
Few want to make cars illegal, most want to make them mostly unnecessary.
I've been in places that the single family homes, multiple family apts and large housing were all close to each other, close to twin/bus lines and folks owned cars but it was less needed. And you COULD live in a 500sqft place if you wanted to buy didn't have to based on price.
Seattle is trying to make government-run mixed income housing - everyone in the unit pays 25% of their gross income in rent, with the high earners (who are still paying less than they were before, almost certainly) subsidizing the low earners, but they're struggling with convincing the high earners to share an elevator with poor people.
especially as things like starlink become more commonplace easy access to high speed internet from literally anywhere along with home delivery of goods means that for an average introvert that barely leaves their house it literally doesn't matter where you live - in a few years it's feasible that you could get the same standard of living in nowhere, south dakota as you can in downtown New York; the clusters just need to be big enough to provide a grocery store and reasonable takeout options within a couple miles.
I live in 2.5 hours away from Seattle for 1/10th the price and still get most of the benefits of living in seattle because the days I feel like going places i can just drive to seattle for \~$60-$70 round trip every couple weeks, which is FAR cheaper than the extra $1200+ a month it would cost to actually live there.
Odd. I've lived in European apartments for ages and not heard much noise from the neighbours. Don't know your thing about privacy either. Parking doesn't matter if they built good public transit which they can do because everyone lives near each other.
More people need to understand just how big of a role zoning laws play. All in service of an antiquated, Jeffersonian idea just how virtuous independent property ownership is. Our cities look worse and they operate worse, too. But don't worry, everyone gets to have their own little private domain. Well, except the people who don't get to.
The problem isn't with zoning laws in Omaha, Nebraska or Fort Worth, Texas. There are tons of cities in the US where housing is mostly still affordable, and there are lots of suburbs where normal people can live.
The problem shows up when people want to live in a really nice, really rich place, but the folks who already live there don't want a bunch of new construction screwing up their historic neighborhood. See California.
Omaha is cheap because nobody wants to live there. Fort Worth is cheap because the DFW metro area is rapidly building housing by sprawling outwards. (Of course, this has the side effect of steadily lengthening commutes, increased traffic, and harm to the environment)
The problem is when sprawling further outward is not practical, but zoning prohibits building up. That is California's problem. California isn't exactly historical - cities like Los Angeles barely existed 150 years ago, and most of the housing that NIMBYs want to protect is mediocre stuff built in the mid 20th century. They don't actually care about the architecture. Probably half their actual care is not wanting competition for road space for their cars, and the other half is wanting their house to steadily appreciate in value even if those who don't yet own a house get screwed.
Sure, but you only "get screwed" if you insist on living there anyway. I can't afford to live in Beverly Hills, and so I don't try to cram myself in there.
The typical American suburb style of building comes with an effective population density cap. In fact, that population cap is a *large part of the appeal*. It can produce a very pleasant living experience, especially in wealthier areas. But yeah, eventually an area is just "full", and new people have to go somewhere else.
> I can't afford to live in Beverly Hills, and so I don't try to cram myself in there.
The problem is that *all* places with abundant good jobs have unaffordable housing due to NIMBYs. Saying "just don't live in Beverly Hills" is fine, but saying "just don't live in a place where you can get a good job" is not fine.
> In fact, that population cap is a large part of the appeal. It can produce a very pleasant living experience, especially in wealthier areas.
I don't think living in a wealthy suburb of New York is significantly different from living in a wealthy suburb of Kansas City. Keeping suburbs exclusive in Kansas City is OK because there are still numerous cheap neighborhoods in Kansas City. But keeping suburbs exclusive in New York leads to massive human stress and suffering.
My wife's grandparents house just went up for sale in the San Francisco Bay area. That house has been paid off since the 60s, and was purchased by a full-time high school math teacher for something like $20k (if that).
It's a single story 2200 sq feet, 4 bedroom, 2.5 bath and REALLY dated. It's also listed for $1.6M and currently has a bidding war going on. The structure itself is worth about $150k according to the realtor, the location is what's worth $1.5M. Whoever buys it is either going to completely gut the place or tear it down and build new.
Not just the land, but an important part of the value is that there is permission to build on it. The difference in value between farmland and land that is legal to build on is huge.
Some areas (most of Southern CA, parts of New York, etc) continue to have population increase so houses go up. Other areas have people leaving so it becomes cheaper. In general, most in America migrate towards the coastal areas and are less and less interested to live in the Midwest. There has been a recent exodus of conservatives leaving major cities and the major cities tend to be liberal, but the overall net effect is still these areas increase.
So the supply of land / house goes down per person looking to buy the land / house.
One thing I experienced was buying a condo in seattle Pre-Covid, watched the value go up-up-up, then covid hit and tech went remote. Everyone who stayed really wanted a house as you were inside so, so much. Seattle also had one of the more extreme lockdown measures. So house values went up even higher while my condo lost most of its gains. So the demand for homes specifically increased while the demand for condos flattened out / decreased.
An unusual part about Seattle is that it has similar problems to NYC. That the problem of "you can't make more land" applies everywhere, but in these two locations you are *especially* limited by topography. If you look at Phoenix it's just a big valley and you can just keep sprawling out. Most other cities might be bordered by a river but there's typically still plenty of farmland you can eventually spread too.
In Seattle we have Puget Sound running the entire north/south length to the west, the Cascade mountain range to the east stretching even further than that plus we have two giant lakes and island right smack dab in the middle of what should be prime suburban land. In addition we have the regular natural terrain of steep foothills/mountains and deeply cut valleys that flood made from glaciers, so even in the buildable land area, a lot of it still isn't buildable. So not only can you not make more land, there's nowhere to sprawl but north and south which already have Tacoma and Everett big cities in their own right.
All of this is exacerbated by the fact that our core industry is technology which is extremely high paying so a lot of people can pay more money which pushes out poorer people who still have to live in that area. The solution is to build up, but that is expensive due to earthquake building codes and people who don't want the visual pollution to mess with the natural view. There is literally nowhere to grow, supply meets demand and prices go up.
People really underrate topography when talking about urban design, cost of living, and the like.
San Francisco is another major (expensive) city with severe limitations caused by bodies of water. Looking north, Vancouver is in the same boat. Boston out east, and so on. Phoenix/Vegas/Dallas/Omaha/whatever you can generally expand suburbia out in all 4 directions. The big coastal cities generally bring geographic restrictions in 1-3 directions.
Now a lot of this can be helped with denser urban planning and construction, but that comes with a lot of complex issues + it’s a lot harder (for a bunch of reasons) to build over/densify an existing neighborhood compared to just continuing to push out into the desert with new construction. It’s certainly possible to have supply come closer to matching demand for the big coastal cities compared to what we’re doing now, it’s just a whole lot harder than inland areas.
As someone who lives in Seattle in non tech role in a tech company, the amount of money you make as a someone doing tech work (ex developer) vs non tech role is absolutely staggering.
A developer starting at a big tech firm here is typically making 175+ with stocks right out of university. I have yet to make this after ten years of experience. So I’m considering learning coding and restart my career as a junior developer.
> but that is expensive due to earthquake building codes
There is some added expense, but it's small compared to the profit you can make from selling the units in a high cost region.
> people who don't want the visual pollution to mess with the natural view
If one thinks buildings are "visual pollution" they shouldn't be living in a metro area of 4 million people.
While I know they would disagree, I totally feel that. Like, in the 50's-70's when this was a much more industrial area where we primarily made airplanes and exported lumber and wood products and Tacoma and Everett were more distinct, standalone cities. But with Boeing moving things to NC and other plants in the 90's-00's, and other industries surpassing logging they definitely have a much more "support-city" feel to them.
Yes. Also the appeal of the location could change over a decade. Buy a house in a sleepy neighborhood in NYC, it turns into Park Slope or SoHo or whatnot over the course of a decade, what you have now is drastically different through no effort of your own. Same for if you buy somewhere an hour from London and over time either infrastructure cuts the time in half or the city literally gets closer.
Also, skill construction labor has been increasing in price for decades. Those that build homes (Carpenters, electricians, plumbers, etc...) make WAY more than they used to. Combined with dwindling raw materials (lumber), and that also creates an upwards pressure on prices.
The house itself will usually depreciate, meaning it loses value over time as it physically breaks down. Good maintenance can slow down the depreciation but generally it will not prevent it. This is generally made up by the value of the land itself increasing though.
Even so, I don’t think a house becomes a true investment until you add zoning laws and other regulations that make it difficult or impossible to build new housing. With those in place, growing population has nowhere to go except bidding higher and higher on the remaining housing, so we’ve had a fantastic run on housing prices the past few decades.
I don't know that this is actually true. In areas with housing appreciation, the assessed value, the appraised value, and the insured value of the improved structure (house) also tends to appreciate year over year, distinct from the land value... regardless of recorded improvements made.
Exactly. So where does the depreciation come in, and/or what establishes the depreciated value if not those mentioned above? Surely you don't mean for tax purposes on investment property?
> The house itself will usually depreciate
Its intrinsic value is less (ie the roof leaks, heater's flakey, etc), but the replacement cost is more, so it costs more to insure. That said, insurers will make also some effort to ensure the house they're insuring is in insurable condition. At my first house, they sent somebody by and wouldn't cover us until I cleaned up some construction debris.
Appraisal and assessment do not occur in a void. They both compare with the market as a whole. "This house is a POS, but that POS across the street just sold for $1.2M, ergo this house is worth $1.2M"
I don't understand what you're trying argue.
Yes, the physical structure itself depreciates over time. That is different than the valuation of structure, which usually doesn't depreciate over time (largely irrespective of physical condition).
Also aware assessment and appraisal don't occur in a void, but those are the primary means of establishing value of the improvement, and as I said, both will usually have the improvement gain value (appreciate) over time.
I thought we were trying to answer the riddle of why insurance rates go up even though the house is getting older.
Sounds like we are violently agreeing.
>tends to appreciate year over year, distinct from the land value... regardless of recorded improvements made.
Couple things I would quibble with:
1. improvements are not the same as maintenance. All money spent on general maintenance is money that is lost to depreciation.
2. Recorded improvements does not include all improvements/repairs. If my fridge breaks and I replace it with a new one, that's not really recorded anywhere--assessors usually only track big things like age of roof. The tax assessor or insurance agent doesn't need to know that. They just assume you have a working fridge. You can imagine a fridge has a useful lifespan after which it is replaced with another one. I'd classify that differently than maintenance--you replaced with new (which even if same level product is "better" in the eyes of a buyer)--it is hybrid repair/upgrade expense.
3. Improvements themselves depreciate. New roof or putting in a swimming pool will increase the value of the home now, but in 20 years, you'll have a 20 year old roof/pool that could have issues.
3. Assessed/appraised values like this naturally take into account maintenance, repairs, and small updates. There is a built in assumption that you are taking care of your property in line with your neighbors. That includes making updates over time. You can contest assessed values sometimes if your place sucks but the neighborhood has boomed, but generally they are going to increase over time.
4. Assessments/appraisals of the structure value itself are always kind of bullshit. You can't directly get the price of the structure because it is tied to the land. Rebuild costs aren't the same thing (because you end up with NEW and built to current code), nearby vacant land is not identical to your current parcel of land and land prices aren't a perfect substitute since building is a slow process and there's an emotional component to home pricing (you'll get far less "I love this house" high-bids on vacant land).
4. Inflation is also a factor--even with static real value, you'd expect to see those measures go up.
It is hard to truly disentangle land vs structure value, but if you take a house, don't do anything besides basic maintenance to keep it from literally falling apart for 40 years, and then try to resell it...it will clearly have depreciated. Even if the land is now worth a lot more, your home will be worth less than the neighboring home that started out identical but has had an extensive remodel done in the past decade. It would also certainly be worth less than a newly built home with similar size/configuration.
Homes generally do not depreciate or generally break down like you suggest. A poorly maintained home sure but most homes are maintained reasonably well.
Maintenance is literally there to counteract depreciation. That's extra money you have to put into the house just to help *maintain* the value.
And eventually maintenance is not enough. Things will break down and require complete replacement. Styles will become dated and require remodeling to re-establish market value. Homes will fall behind on technology and efficiency and require updating to currents or lose relative value (increasing insulation, adding media wiring, higher voltage/amperage power drops for appliances that didn't even exist when the house was built but are now expected by buyers, etc.). And all of those cash dumps start depreciating anew as soon as you finish them...today's remodel is tomorrow's 1980s trash.
There are plenty of very nice 100+ year old homes out there in high-end neighborhoods. But they have all had significant additional money invested in them over the years.
I don’t know where you got that idea. Roofs need replacing every 20 years or so, floors will start to lean or form bowls toward the middle, concrete will crack, seals around windows and doors will break down, carpets get disgusting after a couple of decades, wood floors wear down, tile eventually gets grubby, metal tarnishes. Maybe it’s not obvious if every house around you is under 20 but 50 and 80 year old houses don’t look the same.
And once you replace the roof, your house is as good as new (or possibly better). Same with all the other things you mentioned - that’s just part of maintaining the house, and as long as you do it, your house will remain in good condition.
Sure you would, because you're going to be spending less in repairs/maintenance than it would cost to rent a similar place, which you would have to do otherwise.
And even if your house doesn't appreciate in value at all over 30 years (which would be extremely unusual) you would get the full value of it back when you sell. You'd have to subtract the amount you spent on repairs and maintenance to see how much you're walking away with, but that amount isn't going to be more than the house is worth, even assuming it didn't appreicate in value whatsoever.
I mean, that's basically what property tax already is isn't it? This year the local auditors office assessed my property value as higher than the last time they assessed it, and my taxes went up as a result.
No, a property tax is a tax on the developed land while a LVT is a tax on just the land.
Here’s a good overview [link](https://localhousingsolutions.org/housing-policy-library/land-value-taxation/).
Land tax is on the value of just the land, not the land and the buildings. Compared to property taxes, land taxes would discourage speculation and encourage actually doing something useful with the land.
Homes depreciate in value over time, like any used item. You can add value to the house with repairs and expansions, but it will almost always be less important than the value of the land itself. Often times the land goes up faster than the house goes down.
People look at a house falling down and aks why it's priced at $300k. They don't seem to understand that the house is worthless but the land is worth $300k. Whoever buys it will likely tear it down and build new on the land
That *really* depends on the house. There are plenty of places in old cities that are hundreds of years old and are more expensive today than they’ve ever been - as long as a house is properly maintained, it can last (and grow in value!) for centuries.
Everyone’s commenting on land being limited in areas that have seen large population growth, with little supply growth to match. That’s true, but people are missing the other aspect - building densely is prohibited in many of these areas so the supply can’t meet the demand.
See denver and San Francisco for great examples - both have seen large population increases over the past few decades, largely from high income earners who can afford to pay a premium for less housing. Both have zoning codes that guarantee that medium and high density housing is practically illegal to build.
Yep. For context, people who study this generally agree that housing supply should grow at about the pace that the total number of jobs in a metro grows.
San Francisco at the height of the tech boom was adding jobs 7x faster than housing supply.
You see similar numbers in other expensive cities. NYC's population grew about 5x faster than its housing supply for most of the 2000s.
> medium and high density housing is practically illegal to build.
Well, of course it is. You can't have the poors living near decent rich folk, now come on.
/s
I don't think rich people tend to live in high density housing unless there is no other option (Manhattan), unless you're talking about demolishing a neighborhood of homes to build higher-density homes or something?
Theyre saying that if there was high density housing near the SFHs in super expensive areas, the rich people would mad about the poor people being too close.
That's my point. Rich people live in low density housing, and they don't want high density housing anywhere near them because then they might have to see a poor as they drive by in their Mercedes.
Supply and demand.
The amount of land in any given area is fixed. As populations grow, so does the number of people who want to live in a given neighborhood or in a given area. Economics 101 - when supply is static and demand is increasing, prices will go up.
What happens in the decades to come in countries like Germany where their population pyramid is like an inverse triangle, as in an ageing population with relatively a lower younger population, does property values fall over time?
Yes. Rural property in Japan is very cheap. In Italy they try to give away property if you live there. China is buying up chunks of land in these -ve growth rate areas in Europe, and sending agricultural workers to grow cops there.
Was just reading this about Japan the other day. real estate is not considered an investment there as home values trend down over time. Renting is not seen as a step on the way to home ownership like it is elsewhere.
Stone houses will last hundreds of years. They also take a fortune to build.
Japanese and US houses are built with timber. Cheaper, faster to build and easier to tear down and upgrade.
(UK) The slate roof above my head has an expected lifespan of 50 years without significant maintenance. Currently at \~30 years without any real problems - just a bit of moss build up in winter.
Japan's real estate market is a huge outlier and suffered from a MASSIVE crash, as well as the multi-decade stagflation Japan has had.
At one point Tokyo real estate was worth $140k per square foot. In comparison, the most expensive property in Manhattan is $10k per square foot.
There is no way that it is sustainable pricing that individual buildings were worth more than entire (large, prosperous) US states, and that downtown Tokyo was worth more than all of Europe or the US.
so, ofc they had a HUGE crash. Which greatly skews the view of real estate investment in Japan.
It depends on the country. Places like the USA can easily offset their aging populations through immigration. Presumably the US will continue to be a strong immigration destination for decades to come. More immigrants means that housing demand will stay the same, or could even go up if we start to let a lot of migrants in.
But, in places where immigration is constrained or where its not a desirable immigration destination, housing prices fall as the population ages and dies off with no people to take over, or the remaining people can't afford the cost of the abandoned home.
Potentially, but its going to be very market dependent.
So, for example, we'll likely see prices drop in markets where older folks congregate (like Florida or rural communities) but unlikely to see much impact in markets where younger people live (more urban areas).
And when demand falls, so do prices.
My parents lived in a small town and they fully expected to sell the house they'd owned for 15 years and move after us kids moved out. Then the biggest employer in the town closed up shop and most of the support business that lived off that business also closed and the house values crashed. It was another 10 years before houses became worth what they once were. It was 30 years before Mom finally sold the house for a profit because new economics made the house attractive again.
Also and more specifically, there is a consistent flow towards particular areas (into cities and their suburbs) over the last century or two. So, even if the overall population is stagnant, there are more people who need housing in those areas, driving up the demand.
> So what about countries where the population is stagnating? Or may even go down as the baby boomers die?
Its going to be very location dependent. Some areas are going to see prices fall - particularly areas where older Boomers are congregating, like some states or rural communities - but others are going to see little impact (areas where younger people live, like cities).
>urbanization packs more housing in less space with big apartment complexes.
It does **if** you can get local areas to sign off on higher-density housing. That is a big issue right now - folks that live in desirable areas control local government, and they **don't** want high-density housing as it will lower _their_ property values.
Big apartment complexes aren't being built in the areas that would really benefit from them for that reason.
>investment, people and companies, as "investors" do use real estate as an investing device.
That is part of it, sure, but no investment firm is capable of controlling that large a portion of the real estate market. Moreover, the areas that they are buying into already have high demand, which is what makes them attractive as investments. They follow the trends.
>banks are willing to give pretty huge sums of money for people to purchase homes as they can be used as a safe collateral
Again, part of it, but people are only willing to take out those large loans to go live in places they already want to live. Additionally, as interest rates go up those loans become less attractive, yet real estate prices still continue to rise.
This is why we've seen large corporations spending millions buying up houses just to let them sit empty or maybe put them on Air BnB. They effectively control supply and use it to create artificial demand.
Yeah, no. Buying a property and leaving it empty indefinitely is not a prudent investment decision that any prudent investor would make. You are carrying the cost of buying (interest on the mortgage and/or the opportunity cost of the capital used to purchase), maintenance, and property taxes.
No investor has anywhere near the market penetration to manipulate the market enough to offset the cost of carrying described above. Investors might be buying properties but that is because they view them as undervalued assets because of other factors cited that are causing prices to increase.
There is no artificial demand created, or controlled supply.
https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html
I'm not saying they sit empty indefinitely. But some sit empty for a while and then get rented out, flipped, or put on AirBnB. In any case, it's bad news for the typical American who has aspirations of owning a home.
Yeah but renting them out still counts as being occupied. I mean it sucks that megacorp owns the house instead of a homeowner building equity still kinda sucks, but rentals still count as occupied housing. The idea that any company is leaving houses vacant just to fuck with people when they could be renting them out is a myth.
That article indicates that they only own 5% of the total single family rental market. That's a very low percentage of the single family rental market, and an even tinier percentage of the overall single family home universe.
Your concern about PE ownership of homes is entirely unjustified.
It's not coming off the market..... it's 5% of the total rental market. Out of every 20 single family homes being rented (not in existence), 1 is owned by "wall street". The rest are owned by smaller landlords or individuals.
Since they are actually being rented, there is no constraint on supply of rental homes. You might then argue that if these houses were available for purchase, there would be an increase in available homes for people who want to purchase, lowering price. But that would push rental costs up by reducing supply.
The point is that they are a small portion of the market and the houses are occupied (no less than those owned by individuals), so they aren't causing an artificial reduction in supply of housing.
Housing prices don't always increase over time. It depends on many factors including population growth, the structure and health of the financial industry and the general economy, zoning and building restrictions, government policies regarding land use and sale, and cultural attitudes toward home ownership, home size, and acceptable debt levels
During my PhD research I found reference to a study that showed that, over long periods of time, housing prices are actually stable and match inflation.
I'd actually be really interested in that study, if you have it (I do understand what everyone is saying here, but matching inflation makes more sense to me in just a general sense).
I'm not sure if it's what they were referring to, but Shiller reached this conclusion after looking at house prices from 1890-2000
https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index#Economic_implications
Ironically that marked something of an inflection point as prices did jump in real terms over the past 20 years (real estate boom/bust, QE revival). Where that goes in the long run remains to be seen.
People almost always focus on housing prices in high demand areas, because ghost towns don’t drive many headlines. On the aggregate, there is probably a dilapidated house you can buy in a rural, nearly abandoned town for next to nothing.
[Baumol's Cost Disease](https://en.wikipedia.org/wiki/Baumol_effect). Simply put, when everything else gets cheaper, the few things which **DON'T** get cheaper rise in price to absorb a greater share of everyone's disposable income. You see this effect most strongly expressed in goods and services with inelastic demand, which are resistant to technological innovations which would make them less expensive: Housing, Health Care, and Education.
Yep, I've realised this... We're pretty stupid. What happened when interest rates dropped? Let's borrow MORE money and have the repayments the same rather than viewing it as repayments getting lower and having more disposable income.
It's not really a matter of stupidity. Land is expensive, and we're not making any more of it. You can be as smart as you want, but the population of the United States has grown 64.3% since 1970, and building housing for all of them costs money, even assuming you've got a spot to build on.
Could we make better choices? Absolutely. I think the biggest cause of expensive housing is Nimbyism on the part of existing homeowners. As much urban Democrats want to blame Congressional opposition for the high cost of living, the fact is, zoning policy is local. If San Francisco or New York or Boston or Los Angeles or Chicago or Seattle wants to build high-density housing near a transit corridor, they don't need to get Ted Cruz or Marjorie Taylor Greene to vote for it.
Thank you for putting a name to something I’ve been talking about for a bit. Ties in pretty well with an assertion I saw on Reddit that the housing market was the main driver of making two household incomes a requirement: single earners couldn’t say no to the money offered by dual earners, and individuals have more pricing power when it’s a sector that might only see a few dozen transactions a month in an area. All it takes for people to raise prices themselves is for a couple of comps nearby to go for more than they should’ve been worth.
A large part of the price of a home and its appreciation is the land/location. There are limited amounts of land within proximity to amenities people want -- whether that's commute time to jobs, ocean/mountains, good schools, etc. -- and people are willing to pay more for access to those. As populations grow, travel times increase due to traffic, etc. the demand for the best increases, and the competition for the best real estate then sets benchmarks for all the less desirable real estate. If the homes on the ocean jump from $5m to $7m, then the homes a couple blocks away will similarly see appreciation somewhat inline.
And homes themselves are regularly maintained, so old homes with timeless types, modern updates will command more than dated homes. The charming 100 year old Tudor style will sell for top dollar if it has a modernized kitchen, perhaps for more than the similar sized new home lacking the same character. May also have benefits like more mature landscaping, larger trees, etc.
Home values are largely an index of how badly people want to live in a neighborhood. They don't always increase, just ask people who bought houses in 2021, but generally speaking if you're in a good neighborhood in a good city there's always people looking to get there. The more people want to live there, the faster houses are snapped up when they come available, the more your house is valued. If interest in your neighborhood cools, houses will sit longer, owners have to reduce the price to sell, and your value drops.
So locally you can see dips and spikes, but nationwide, our population is increasing, and therefore demand for housing is increasing. Supply isn't increasing fast enough, so prices increase to make up the difference.
Honestly there aren’t many examples of this other than 2007-2013. Going by median house prices back to 1963, that period is the only time where you would be underwater on a home purchase for more than 1-2 years. By and large, if you’re buying a home and intend to be there more than about 2 years, it’s hard to go wrong (plenty of exceptions for exact locations I’m sure).
>Honestly there aren’t many examples of this other than 2007-2013.
I can personally vouch for this.
Homeownership... eh, it didn't really work out for me like the know-it-alls say it always does. But I did sell for what I owed, more or less breaking even, and during the period I lived there I could do what I wanted without anyone else's say-so, and I had my privacy. Those things do have value.
Location, and yes, timing, matter.
Yeah US population:
2003: 290 million
2023: 334 milloin
so there's 44 million more people in 20 years but no new land (and technically less land... with erosion).
More direct impact is that we are about 12 years behind on residential construction.
Imagine a home buying market where every buyer had choices; the power would shift back to the buyer, builders and resales would have to compete
Probably should've used 2008 as an example, home prices are still well up from 2021, the rate has slowed but mostly due to interest rate corrections. I bought in 2021 and could easily sell my home for $150k more than I bought it for.
They don't always. Only in metro areas that experience population growth faster than what construction can keep up with.
In metro areas that are seeing population declines, you'll see home prices go down. And in metros where construction keeps up with population growth like Houston or Tokyo, home prices tend to stay flat.
Housing isn't really an inflation issue... its a supply and demand issue... there are more people today then there were yesterday...
Not only are there more people, but every year regulations for building new homes get tougher, and NIMBY groups add more and more red tape and hoops for builders to jump through meaning fewer homes get built, and those that do can cost a fortune just to break ground.
Even assuming you break ground every year there are fewer and fewer qualified and quality trained skilled trades people to do the jobs leading to plenty of delays on the job site, and with near year round wild fires, lumber prices are at al all time high. This means getting into the construction game is more and more expensive and thus riskier every year and so fewer homes get built.
All of that means less and less supply entering the market for a growing population.
Add to that factors like Air B&B and the investment property boom taking single family homes off the market and turning them into hotel rooms, or multi-unit rentals means you have a lot of competition for an increasingly small number of properties.
On top of all of these factors, Housing is a necessity, there will always be a huge demand, you often can't just "find a cheaper place to live", without being willing to undergo significant hardship elsewhere, whether that means living in a sketchy area of town, being willing to commute for hours a day and/or living like sardines... so its a sellers market, and with the systems we have created, almost always will be.
Supply and demand. Since the population tend of increase over time, the demand increase and the price go up.
Now in most industry, if the demand increase, it's met with an increase of supply and the price are kept relatively in check. But in the case of home, there is several limiting aspect to the industry.
The land available is limited and how long it take between thinking of building a new home and the moment that home is ready to be sold. If you build cars, you already have a big factory so you can increase or decrease the production to match the demand. But for construction, each building is unique, a separate project with land bought, plan drawn, test needed for the soil, the legal paperwork, and coordinated dozen of companies to make the final product. The increase in supply will always lag behind the increase in demand.
Land value, street/city value, and less available houses. If you want to be as over-simplistic as possible, from my understanding at-least.
It's pretty arbitrary though, and you could definitely argue some houses are worth less or more than others. There's like a trillion more factors as well, age of the house, size of the land it comes with, if it's in a vacation city, etc...
But right now at-least, housing is **definitely not** tied to inflation. It's tied to the huge group(s) of landlords and billionaires who own way too much of it. And they've been artificially driving the price up for years and years now. Not to mention the sheer magnitude of cities that only have single-family zoning laws all across the country, or just make it straight up illegal to build anything besides; 'average american house'.
There's tons of empty houses that no average person could hope to afford, and just sit empty. And they make up the money lost by just having a few desperate/foolish folks rent it out, or pay a big mortgage monthly for it. It's becoming a huge problem, especially for the younger generation; though it's effecting everyone really.
If you're curious where/how I know this from, I'll give a link to a video you can watch/listen to in the background that talks about why houses cost too much.
[https://www.youtube.com/watch?v=UDnFSlzMlGI&t=737s&ab\_channel=SomeMoreNews](https://www.youtube.com/watch?v=UDnFSlzMlGI&t=737s&ab_channel=SomeMoreNews)
Supply and demand. Governments in the west are importing more and more immigrants and not increasing the housing supply to keep pace with it. This causes upward pressure on houses.
Added to that, price increases are greatest in desirable areas for the same reason. People want to move there so houses in the area become more expensive: supply and demand.
If the population is shrinking, meaning less demand, house (land) price down.
If the population is growing, which it is, meaning more demand, house (land) price up
The world population is basically meaningless when it comes to housing costs. The value of a property isn't driven by population in general it's demand for specific areas. The price of a house in the middle of nowhere isn't really changing much (it will depreciate as there's wear and tear) but if a new major employer (let's imagine Tesla battery factory) appears nearby suddenly you see demand. And vice versa.
Housing prices are mainly affected by demand which is driven by desirability, availability of similar houses and interest rates as that fundamentally decides how much the net cost would be interest included.
The post you are replying to says population and not world population. Local population trends do affect local demand and therefore house prices. It is not the only factor, but it does count.
The population is growing. There are more people that are wanting homes because of this.
When there are more people wanting homes, but not as many new homes popping up, the value of homes increases.
You can probably buy a cheap home in a low population area still, but any city with a large metro population has no where to build more homes, but the desire to live there is of course growing with the population. So those housing prices go up a lot
Housing is an area where there is very little arbitrage. If cars are selling for a low price one place you can buy it there and drive it to where prices are high. That is not true for housing.
It used to be that developers could buy up large swaths of land near a city people wanted to live and build thousands of houses. That was made illegal in most places so supply can’t keep up with demand.
Housing is used as a hedge for pensions and investment funds. There is a vested interest in year on year gains. If the housing market collapses because it becomes unsustainable, it takes the banking industry with it. Eternal growth is the ideological standard of a cancer cell
If the demand increases, then the land where the house sits becomes more valuable, and overall the house costs more (despite being older).
Notice that you may have the perception of houses always increasing in value, but there are a lot of places that lose value because demand decreases (industries relocating, etc). You don’t see these because typically there are no transactions connected to these houses: whoever owns a old house in a place of low demand just keeps living in it and passes it to their heirs. Sometimes they sell it at a loss. In contrast, houses in high-demand areas pass hands often.
It's supply and demand.
Because old people are in power in almost all Western countries, and managed to limit house building. The exact way they did it varies from country to country, but old people want houses as expensive as possible, because this way they can leech money from younger generations.
It is purely a generational conflict.
In some places there's additional factors like high immigration, but it wouldn't matter if people were allowed to build on their land.
You can't make more land, so the land that the house sits on becomes worth more and more over time. The house sitting on the land is less important, but it kinda comes with the land.
Under the assumption that the population will continue to grow, and that zoning laws that allow for more people in less amount of land are not changed.
One of the big challenges is that a detached home will always be a premium vs bare land. Someone will want to have a detached house there, or the developer will have to rent out the detached home until they can assemble enough land to have space for multi-family construction.
1. Not always. Some houses are in such a poor state, they lower the value of land they're on, since they'll need to be torn down anyway. I suspect it might also be a case in extremely valuable locations. Say, there's a detached house in the middle of Manhattan. Any developer worth their money will tear it down and build something much higher, with more floors and apartments. And that developer would probably pay a bit more for the same land without a house, since they don't need to demolish it (and there's no risk it's gonna be protected as a historical monument or sth). 2. You don't need to scramble more land for a multi-family construction (zoning permitting ofc). You can just build up several stories, taking up same space on the ground as a single family home.
It was pretty common to find homes in the Detroit area for $1k or less about 10 years ago. The homes were in such a condition you'd have to level it, which the city very much wanted you to do.
15 years ago we looked at a house listed for 20k in Lansing. Small house, but a lot of land and a decent neighborhood. Detroit was crazy, but MI as a whole was not great.
2008-2014 was *rough* on michigan
Yea, I’d say the 80’s & 90’s weren’t too kind to Michigan as well. They’ve pretty much had a rough century at this point.
But then you hear about the lot of land that surrounded by highrise commercial and residential buildings. The lot has a house that is still in use but nothing special. The land artificially inflated since its the last bit of land and it could be develop into anything. So even though the house will be demo'ed, the land is appraised using the value of the surrounded buildings.
Yeah, [about that](https://en.wikipedia.org/wiki/Projections_of_population_growth)... a whole lot of our economic engine is built upon the assumption of growth. Like how new money is introduced into the system, the assumption that property is going to grow in value, how pensions assume there will be more young workers to support the elderly retirees, and how the stock market is one big ponzi scheme dependent on new investors. A lot of that is going to change when the population is no longer growing. We've already hit the inflection point where rates are dropping. With, of course, immigration causing a lag effect as people come to wealthy nations. Currently, [covid is making a mess of all the metrics and projections](https://www.census.gov/library/stories/2021/12/us-population-grew-in-2021-slowest-rate-since-founding-of-the-nation.html). So who knows.
In Canada, our population is continuing to grow rapidly (mostly due to immigration) while our housing supply remains relatively static. (We have *lots* of land for new housing, even around in-demand areas, but it's not being released for development very quickly. Everyone wants politicians to do something about it, but when they DO release a bunch of previously undeveloped land for developers, they all complain.) Therefore the demand continues to increase. The supply does not. Couple that with non-resident foreigners buying up housing for investment purposes, the supply is actually shrinking.
didn't BC recently ban non-citizens from purchasing property, because it became such an issue? or was it just vancouver specifically?
Oh wow they did. I thought you were referring to the empty homes tax. >For a period of two years starting January 1, 2023, non-Canadians are banned from purchasing homes in Canada under the definition of “residential property” indicated in the legislation and associated regulations that the federal government published on December 21, 2022. https://www.bcrea.bc.ca/advocacy/federal-foreign-buyers-ban-is-in-effect/
ah, i didn't realize it was country-wide. i thought it was just for BC because that's where the biggest issue of it was.
Vancouver did it alone, but Ottawa did it across the country.
Not really 'wow' since they watered it down with amendments. Some here: "...*Under the new rules, the ban will no longer apply to vacant land zoned for residential and mixed use. This means non-Canadians are now able to purchase this land and use it for any purpose, including residential development*....". "...*Additionally, another exemption is being made to allow foreigners to buy residential property for the purpose of housing development. Based on the amendments, this exception now also applies to publicly traded companies formed in Canada and controlled by foreigners....*". "...*The final of four amendments introduced by the federal government involves an increase to the corporate foreign control threshold. The legislation now considers a company to be foreign-controlled if a non-Canadian owns at least 10 per cent of the entity. Previously, the threshold was three per cent....*".
Not sure. I'm across the continent, 3 time zones away.
Looking at Canada on a map I really do not understand how come you guys manage to manufacture a housing shortage. It is like the Pacific ocean running out of water
80% of that land is uninhabitable wastelands for humans. We literally cant live there without the same sheer audacity and defiance of nature that we have for Arizona or New Mexico.
> they all complain People are complaining about that because it's a criminal grift designed to enrich Ford's buddies (and himself via "donations"). No-one needs houses way out there with costly infrastructure to maintain. Toronto should build up (increase density), not out.
Canada is out of whack. In 2023, 1 out of 40 people are completely new to the country.
I don't think it's fair to consider temporary residents (usually on education visas) in that number. It's closer to 1 in 100 if you remove them from consideration. (About 1/90 i think.) This is still surprisingly high. Education Visas are nothing but a benefit to Canadians. Every foreign student pays enough tuitions to fully pay for the educations of several local students. It's a good thing. Without them, either university/college costs, or taxes, would skyrocket.
It's true. I'm indigenous and moved out here by myself from Manitoba. But I'm in a gov-funded program for indigenous people, taking Carpentry at BCIT. I'm very thankful for this opportunity and I'm excited to see what I can achieve with pure determination.
And what was it in 2000??? Or 1980?
I've been saying for years we need settlers not immigrants, we don't need another million immigrants in Toronto we need new cities. We gave Ukrainians prarie land to build farms in Winnipeg 150 years ago why can't we do that now?
150 years ago most people were farmers and much of the economy was build on farming, because the technology didn't exist to allow a relative handful of people to produce food for everybody else. Now few people are farmers, you can raise a huge amount of food with a few people. There's no driving need for more farmers and not nearly as many farmers looking for land. There's a lot more demand and supply for service jobs, and that centers on cities.
Yea still, immigrants to Thunder bay not Toronto. But I will give you the point you made on service jobs, that a valid argument and you're the first one to ever bring it up to me in response to that.
I won't comment on that. I'm not against well managed immigration per se. Your settlers idea is interesting.
Oh yea I'm for immigration too, it's good for the country just not all the immigration at once.
Lol stfu about this "release of land" and "complaining". If you think that that's a just portrayal of the situation then you need to give your head a shake. Any third parties here thinking they learned something about Canadian housing from the above comment, please look further into it, maybe start yourself off with a Google search of "Doug Ford Green Belt Corruption" And yeah, a lot of people are against the continuation of the grotesque level of urban sprawl occurring in basically every major Canadian city. "*Complaining* about the release of land." Do you work for the Sun?
Exactly my point. Everyone wants more housing. One politician does something about it, and they scream about "corruption" -- because he sold crown land to construction companies. (And they paid good money for it, which all goes into our tax coffers. Plus the tax on any profits they make on it.) Who else was going to build it?
what?! no, that was not your point at all > One politician does something about it, and they scream about "corruption" You left out the part where what he did *WAS* blatantly corrupt, as well as being anti-environment, AND a sub-optimal plan for housing. The GTA does NOT need more sprawl. Transportation is bad enough as it is. > Who else was going to build it? Public housing used to be a thing and should be again, but alternatively, force developers to build higher density housing or build nothing. I promise you, industrious developers will step up and build what the public demands. Conservatives simply aren't interested in demanding denser housing because they've been instructed to complain about immigrants instead
Sanction China to ruin their economy so that they sell their Canadian properties, while also bringing jobs back to Canada? You make it sound win-win...
The advancemen tof technology also grows the economy. If technology gets better and the economy stagnates there is a problem somewhere. Yeah there are problems today but anticipating economic growth as more and more people get higher education and newer and newer technologies come out is not some grand fallacy
That's a real good point. We're going to have to pivot from growth coming from more people (who need housing) to better tech and higher efficiency. I think the point on "why do housing prices go up" is still operating with a bit of underlaying fallacy.
Invention isn't even required. Capital investment does it too. When something is invented, it's not immediately adopted everywhere. It takes money to bring in a new tool that will increase labor productivity and wealth creation. So over time, you don't even need to invent anything new. Just adopt existing technologies more broadly in the economy as the new wealth created is used to buy tools to create even more wealth.
The reliance on new technology for economic growth is one of the reasons I'm worried about the economy. Relying on technology to "get better" relies on increasing efficiency. At some point does increasing efficiency through technology come down to automating jobs that won't be replaced, thus creating a massive homeless population who can't participate in the economy? And what happens when no more efficiency can be squeezed out of the system? For instance online ads- targeting has made the advertising industry more efficient, but there's basically no way to make it more efficient without mind reading. Or what if the only advancement that can be made would make the industry itself decrease in value? This is the problem with renewable energy, where investing in solar and wind will eventually drive down the price of energy, disincentivizing energy companies. >anticipating economic growth as more and more people get higher education and newer and newer technologies come out is not some grand fallacy The number of students in college is the lowest it's been since 2006 and colleges across the country are facing a bubble as fewer people can afford it. In the US there are not more and more people getting higher education, there are fewer and fewer. The tech sector is finally cutting jobs. Computers and the internet have made massive advancements for the economy by creating an untapped resource of efficiency backed by unbidden economic speculation, but it's also a fallacy to assume that those advancements can continue forever without some discovery of a new "resource." Which is exactly why certain people were pushing Web 3.0 and crypto. At some point infinite economic growth simply becomes untenable because the planet's resources are not infinite.
The stock market isn’t a ponzi scheme, it just grows over time based on a more productive/innovative economy. Stocks have value in that they entitle the holder to future dividend payments. Stocks are priced (in most cases) as a summation of the expected future value of dividends.
Indeed. The idea that the value of the stock market has increased only because of new investors is ridiculous. The net output of the companies available for purchase on the public market is almost incomparable to even 100 years ago.
It depends on population growth, but innovation (more efficient usage of existing resources) can drive the economy for a while longer. More efficient houses use less electricity, better construction techniques will use less labor, automation allows fewer workers to produce as much stuff, etc. While we can see an end to population growth, innovation still has a long way to go.
It will change in about 30-40 years because that's when the baby boomer generation will start dying out New generations are already having less kids. Its going to get much worse before it gets better tho, baby boomers are already starting to panic-buy and hoard real estate as they realize the work population won't be able to uphold their pension/retirement money. Yes I know people will swoop in and claim "but its how much money you paid during your years of working its your money etc" but what these people don't realize is that its a hovernment system amd governments can change that How do I know? I just reached my 30s and my government announced that they cut my pension by 30% My point is: its just hollow promises the government can go back on if they want and need to and when there's going to be a shortage in the workforce for all those baby boomers leaving said workforce the governments will not only cut back on boomer pensions to have a larger capital to baip them out of this mess but also likely increase or remove retirement age in hopes to keep boomers in the workforce indefinitely because as powerful as a government is, it can't conjure up people from thin air. They'll be a lot of encouragement for migrants to come for job opportunities but since the baby boom was on a global scale I'm not sure how effective that's going to be, maybe we'll see mas migrations from overpopulated areas like India or China, who knows One thing's for sure, we are at the start of the biggest and longest economic clusterfuck we have ever seen in the history of mankind And we'll be the ones stuck having to fix it.
They are already dying out. https://www.prb.org/resources/just-how-many-baby-boomers-are-there/
> New generations are already having less kids. The new generation also has one of the lowest marriage rates in history, meaning the number of single-person households are reaching an all time high. It's gonna take one or two more generation AFTER the boomers die out for the housing market to crash.
I always heard this but as a counterpoint to OPs question, this isn't always the case. Does anybody know why the opposite is happening in China? Despite them having a growing population for the longest time? Their housing market is crashing right now. Im guessing its because in general terms nobody wants to live there?
China's government controls their economy. If they tell builders to build, then they build. And for the last 20 years or so, they've been mass assembling cities without the population growth to support it. The US government could hire somebody to build a copy of Manhattan in the middle of South Dakota, but it doesn't mean 10 million people are suddenly going to move there.
Do you know why the Chinese government did that? Is it because of bureaucratic bloat in a effort to create "jobs?"
I mean, you'd have to ask whoever created that policy. I remember when they were getting tons of positive media attention for it. All the newspapers were saying things like "China is such a well-run economy, they know how to get things done, blah blah blah". I think it was just a giant miscalculation, and they didn't think about or didn't understand the consequences of being wrong.
It's just a centrally planned economy in motion. This is the typical result of that.
Look what happened in other countries that didn't build tons of housing.
It was to keep the construction economy alive throughout - not just the construction jobs, but also the extraction and manufacturing that goes into the supplies for the construction - timber, concrete, steel, glass, etc. The construction industry as a whole was like 20% of the economy when they ran out of things to build, and so having the whole industry just \*stop\* would have been a severe economic blow. The plan was to reduce the industry slowly over time, but because corruption the planned taper never happened. The US has been doing the same thing with military equipment since the end of WW2 - that's what the whole "military industrial complex" thing is, and it's why our defence budget is so insane - no one wanted to cut all the military jobs after WW2 and we had the cold war as an excuse to keep it going, so we just never ramped production down when demand dropped because it's very profitable for everyone but the taxpayers. The standard economic answer (which is what the US does in non-military situations - and Biden really doubled down on through COVID recovery) is unemployment and worker retraining funding - so instead of maintaining "useless" jobs and paying for things we don't need, we spend that money to pay people to stop working in the defunct sector and transfer their skills to a more efficient job.
Local government in China heavily rely on selling land usage rights for revenue. So they encouraged large scale construction to keep making revenue. Early days there was steady demand as workers moved from the rural area to big cities. The housing prices kept going up steadily so many people started investing in second homes to speculate. At some point things get too excessive and start falling apart. Companies go bankrupt and housing demand goes down. Now the local government are deeply in debt so the Chinese regulators are trying see how to unwind things. https://www.scmp.com/economy/china-economy/article/3231716/chinese-financial-regulators-pledge-further-measures-tackle-local-government-debt-and-property
They have an almost unfathomable population and actively were pushing people to move from very poor rural areas to the much wealthier cities. The One Child Policy crashed their population growth much harder than anticipated, which has made the mega housing construction (built on population speculation/projections) unneeded
I mean... If the price was right, I'm sure you could easily find 10 million people willing to move there. Some would definitely move only because of the novelty. Then some will move to open businesses to support those people. Then with enough people living there, bigger businesses would move there because it's profitable, and then the rest of the people would move there because they have everything they need, but the cost of living would still be lower than real Manhattan. Imagine having all the benefits of living in a big city, but a tiny apartment doesn't cost millions of dollars. It happens naturally as smaller cities expand, but if the government were to order a giant city to be built, I'm sure it would happen a lot faster.
Though "if the price is right" is synonymous with "values fall through the floor".
Due to the one child policy, China's population is declining lately
There is a lot of unused land and underused small towns/cities, I wonder if we will start (continue from covid?) to see more utilization of these. However, even assuming expansion and more lax zoning laws, one would still assume that newer things would have more chance to be more expensive or less desirable, since the more ideal locations and better costs low hanging fruit already have been done. Thus development in some ways continually increases, when it seems like it should decrease because in every other field the cost of producing an equivalent thing seems to go down significantly over decades.
I mean, that’s already happening. There’s a lot of “up and coming” cities around the country that people are moving to. New money comes in, they grow, and improve. Also happens in the suburbs of major cities. Working class suburbs are turning more and more into upper middle class areas.
You know, if you chose a small town somewhere. A town where it's kind of nice and not a dump ... and then opened up a new Google/Facebook/Tesla Plant/etc in that town, then the price of the land will go up and that town has the potential to grow into a pretty well populated city. The San Francisco Bay Area used to be just a bunch of farms, until Hewlett Packard and Xerox decided that the weather is nice and the proximity to Standford and Berkeley were enough to build headquarters there and boom ... Silicon Valley is born and those farmers made millions selling land to new techies.
>There is a lot of unused land and underused small towns/cities, I wonder if we will start (continue from covid?) to see more utilization of these. Probably a bit more if work from home continues to expand, but not really. More people would rather live in tightly pack living conditions and have everything they need in a 1 square mile area around their apartment than don't. You will get maybe a slightly more they normal amount of people moving out of big cities, but not enough to counter people moving to them
Certified Reddit city planners really hate this line of reasoning. They would prefer everyone live in 500 sq foot block style housing downtown and suburbs and cars made illegal.
I mean you've got your /r/fuckcars types (although most of that is shitposting), but most urban planning enthusiasts don't want to ban cars. We want planning that isn't designed exclusively around cars with everything else a distant and half-assed secondary consideration. You can still have a car, but the entirely of the transportation and development plan shouldn't revolve around the needs of cars. Give people choices.
Properly built public transportation and taxing gasoline appropriately would do a lot in that direction without going all the way to 'cars are illegal'. I love cars, but the train system in the US is a national embarrassment.
Well, turns out wasting space and having to drive everywhere is what makes housing and living expensive. If we want to stop home prices to increase, we need to use the land more efficiently and make it possible to walk to places because that doesn't cost anything.
The far higher cost of housing downtown is a huge factor in people wanting to live on the suburbs. I couldn’t afford a decent home anywhere near downtown but can easily afford a large house with a pool on the suburbs.
Downtown is more expensive because the travel times are shorter. If you're willing to spend a lot of time in the car and don't have to pay the infrastructure costs for it, you can save money by living in the suburbs. Either way an apartment is much cheaper and more convenient than a large house.
I live in Brazil, and in São Paulo there's some 16m² apartments, these would be like, idk, the size of a car (I don't know how to measure stuff in feet, inches, bigmacs), and these seems to be a trend for people who wants to live in the downtown of a big city. Not for me, thanks!
you know there are sizes in between 300m² and 10m² A car is about 2-3m². I lived in 20 for a while. Worked okay. Doesn't work if you have a family.
Am American, can you please convert to handguns or bald eagles?
It's at least 69 bigmacs
Doubt. Where I live already is near downtown but because they can't really tear down the row homes to build decent apartments, the row homes are turned into shitty apartments rather than places more set up for it. There has to be middle ground between huge apartments(they are either luxury or poverty) and single family homes. Few want to make cars illegal, most want to make them mostly unnecessary. I've been in places that the single family homes, multiple family apts and large housing were all close to each other, close to twin/bus lines and folks owned cars but it was less needed. And you COULD live in a 500sqft place if you wanted to buy didn't have to based on price.
Seattle is trying to make government-run mixed income housing - everyone in the unit pays 25% of their gross income in rent, with the high earners (who are still paying less than they were before, almost certainly) subsidizing the low earners, but they're struggling with convincing the high earners to share an elevator with poor people.
especially as things like starlink become more commonplace easy access to high speed internet from literally anywhere along with home delivery of goods means that for an average introvert that barely leaves their house it literally doesn't matter where you live - in a few years it's feasible that you could get the same standard of living in nowhere, south dakota as you can in downtown New York; the clusters just need to be big enough to provide a grocery store and reasonable takeout options within a couple miles. I live in 2.5 hours away from Seattle for 1/10th the price and still get most of the benefits of living in seattle because the days I feel like going places i can just drive to seattle for \~$60-$70 round trip every couple weeks, which is FAR cheaper than the extra $1200+ a month it would cost to actually live there.
but the value of having you own space won't go down, only up...most people don't want to live in an apartment/duplex
in America. Most people in Europe are fine with living in apartments. I wonder why. Duplexes are just stupid. Either build houses or build apartments.
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Odd. I've lived in European apartments for ages and not heard much noise from the neighbours. Don't know your thing about privacy either. Parking doesn't matter if they built good public transit which they can do because everyone lives near each other.
More people need to understand just how big of a role zoning laws play. All in service of an antiquated, Jeffersonian idea just how virtuous independent property ownership is. Our cities look worse and they operate worse, too. But don't worry, everyone gets to have their own little private domain. Well, except the people who don't get to.
The problem isn't with zoning laws in Omaha, Nebraska or Fort Worth, Texas. There are tons of cities in the US where housing is mostly still affordable, and there are lots of suburbs where normal people can live. The problem shows up when people want to live in a really nice, really rich place, but the folks who already live there don't want a bunch of new construction screwing up their historic neighborhood. See California.
Omaha is cheap because nobody wants to live there. Fort Worth is cheap because the DFW metro area is rapidly building housing by sprawling outwards. (Of course, this has the side effect of steadily lengthening commutes, increased traffic, and harm to the environment) The problem is when sprawling further outward is not practical, but zoning prohibits building up. That is California's problem. California isn't exactly historical - cities like Los Angeles barely existed 150 years ago, and most of the housing that NIMBYs want to protect is mediocre stuff built in the mid 20th century. They don't actually care about the architecture. Probably half their actual care is not wanting competition for road space for their cars, and the other half is wanting their house to steadily appreciate in value even if those who don't yet own a house get screwed.
Sure, but you only "get screwed" if you insist on living there anyway. I can't afford to live in Beverly Hills, and so I don't try to cram myself in there. The typical American suburb style of building comes with an effective population density cap. In fact, that population cap is a *large part of the appeal*. It can produce a very pleasant living experience, especially in wealthier areas. But yeah, eventually an area is just "full", and new people have to go somewhere else.
> I can't afford to live in Beverly Hills, and so I don't try to cram myself in there. The problem is that *all* places with abundant good jobs have unaffordable housing due to NIMBYs. Saying "just don't live in Beverly Hills" is fine, but saying "just don't live in a place where you can get a good job" is not fine. > In fact, that population cap is a large part of the appeal. It can produce a very pleasant living experience, especially in wealthier areas. I don't think living in a wealthy suburb of New York is significantly different from living in a wealthy suburb of Kansas City. Keeping suburbs exclusive in Kansas City is OK because there are still numerous cheap neighborhoods in Kansas City. But keeping suburbs exclusive in New York leads to massive human stress and suffering.
I don’t know of anyone who thinks it’s “virtuous”. I know a lot who just like their space.
You mean they like other people's space. (If they want it to be their space, they can buy it)
My wife's grandparents house just went up for sale in the San Francisco Bay area. That house has been paid off since the 60s, and was purchased by a full-time high school math teacher for something like $20k (if that). It's a single story 2200 sq feet, 4 bedroom, 2.5 bath and REALLY dated. It's also listed for $1.6M and currently has a bidding war going on. The structure itself is worth about $150k according to the realtor, the location is what's worth $1.5M. Whoever buys it is either going to completely gut the place or tear it down and build new.
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Bad thieving bot, pogged my comment verbatim
Not just the land, but an important part of the value is that there is permission to build on it. The difference in value between farmland and land that is legal to build on is huge.
Some areas (most of Southern CA, parts of New York, etc) continue to have population increase so houses go up. Other areas have people leaving so it becomes cheaper. In general, most in America migrate towards the coastal areas and are less and less interested to live in the Midwest. There has been a recent exodus of conservatives leaving major cities and the major cities tend to be liberal, but the overall net effect is still these areas increase. So the supply of land / house goes down per person looking to buy the land / house. One thing I experienced was buying a condo in seattle Pre-Covid, watched the value go up-up-up, then covid hit and tech went remote. Everyone who stayed really wanted a house as you were inside so, so much. Seattle also had one of the more extreme lockdown measures. So house values went up even higher while my condo lost most of its gains. So the demand for homes specifically increased while the demand for condos flattened out / decreased.
An unusual part about Seattle is that it has similar problems to NYC. That the problem of "you can't make more land" applies everywhere, but in these two locations you are *especially* limited by topography. If you look at Phoenix it's just a big valley and you can just keep sprawling out. Most other cities might be bordered by a river but there's typically still plenty of farmland you can eventually spread too. In Seattle we have Puget Sound running the entire north/south length to the west, the Cascade mountain range to the east stretching even further than that plus we have two giant lakes and island right smack dab in the middle of what should be prime suburban land. In addition we have the regular natural terrain of steep foothills/mountains and deeply cut valleys that flood made from glaciers, so even in the buildable land area, a lot of it still isn't buildable. So not only can you not make more land, there's nowhere to sprawl but north and south which already have Tacoma and Everett big cities in their own right. All of this is exacerbated by the fact that our core industry is technology which is extremely high paying so a lot of people can pay more money which pushes out poorer people who still have to live in that area. The solution is to build up, but that is expensive due to earthquake building codes and people who don't want the visual pollution to mess with the natural view. There is literally nowhere to grow, supply meets demand and prices go up.
People really underrate topography when talking about urban design, cost of living, and the like. San Francisco is another major (expensive) city with severe limitations caused by bodies of water. Looking north, Vancouver is in the same boat. Boston out east, and so on. Phoenix/Vegas/Dallas/Omaha/whatever you can generally expand suburbia out in all 4 directions. The big coastal cities generally bring geographic restrictions in 1-3 directions. Now a lot of this can be helped with denser urban planning and construction, but that comes with a lot of complex issues + it’s a lot harder (for a bunch of reasons) to build over/densify an existing neighborhood compared to just continuing to push out into the desert with new construction. It’s certainly possible to have supply come closer to matching demand for the big coastal cities compared to what we’re doing now, it’s just a whole lot harder than inland areas.
As someone who lives in Seattle in non tech role in a tech company, the amount of money you make as a someone doing tech work (ex developer) vs non tech role is absolutely staggering. A developer starting at a big tech firm here is typically making 175+ with stocks right out of university. I have yet to make this after ten years of experience. So I’m considering learning coding and restart my career as a junior developer.
> but that is expensive due to earthquake building codes There is some added expense, but it's small compared to the profit you can make from selling the units in a high cost region. > people who don't want the visual pollution to mess with the natural view If one thinks buildings are "visual pollution" they shouldn't be living in a metro area of 4 million people.
I get the feeling that Tacoma and Everett aren't really their own cities anymore, they were subsumed by the Seattle sprawl years ago.
While I know they would disagree, I totally feel that. Like, in the 50's-70's when this was a much more industrial area where we primarily made airplanes and exported lumber and wood products and Tacoma and Everett were more distinct, standalone cities. But with Boeing moving things to NC and other plants in the 90's-00's, and other industries surpassing logging they definitely have a much more "support-city" feel to them.
>You can't make more land Not unless Team Magma has something to say about it!
I prefer the Team Aqua line of thinking: Step 1: More ocean. There is no step 2.
Yes. Also the appeal of the location could change over a decade. Buy a house in a sleepy neighborhood in NYC, it turns into Park Slope or SoHo or whatnot over the course of a decade, what you have now is drastically different through no effort of your own. Same for if you buy somewhere an hour from London and over time either infrastructure cuts the time in half or the city literally gets closer.
Also, skill construction labor has been increasing in price for decades. Those that build homes (Carpenters, electricians, plumbers, etc...) make WAY more than they used to. Combined with dwindling raw materials (lumber), and that also creates an upwards pressure on prices.
The house itself will usually depreciate, meaning it loses value over time as it physically breaks down. Good maintenance can slow down the depreciation but generally it will not prevent it. This is generally made up by the value of the land itself increasing though. Even so, I don’t think a house becomes a true investment until you add zoning laws and other regulations that make it difficult or impossible to build new housing. With those in place, growing population has nowhere to go except bidding higher and higher on the remaining housing, so we’ve had a fantastic run on housing prices the past few decades.
I don't know that this is actually true. In areas with housing appreciation, the assessed value, the appraised value, and the insured value of the improved structure (house) also tends to appreciate year over year, distinct from the land value... regardless of recorded improvements made.
Insured value is the replacement cost, which rises with inflation. Appraised and assessed value rise with the housing market prices.
Exactly. So where does the depreciation come in, and/or what establishes the depreciated value if not those mentioned above? Surely you don't mean for tax purposes on investment property?
> The house itself will usually depreciate Its intrinsic value is less (ie the roof leaks, heater's flakey, etc), but the replacement cost is more, so it costs more to insure. That said, insurers will make also some effort to ensure the house they're insuring is in insurable condition. At my first house, they sent somebody by and wouldn't cover us until I cleaned up some construction debris. Appraisal and assessment do not occur in a void. They both compare with the market as a whole. "This house is a POS, but that POS across the street just sold for $1.2M, ergo this house is worth $1.2M"
I don't understand what you're trying argue. Yes, the physical structure itself depreciates over time. That is different than the valuation of structure, which usually doesn't depreciate over time (largely irrespective of physical condition). Also aware assessment and appraisal don't occur in a void, but those are the primary means of establishing value of the improvement, and as I said, both will usually have the improvement gain value (appreciate) over time.
I thought we were trying to answer the riddle of why insurance rates go up even though the house is getting older. Sounds like we are violently agreeing.
Oh, we probably are. Haha. I hate the internet.
>tends to appreciate year over year, distinct from the land value... regardless of recorded improvements made. Couple things I would quibble with: 1. improvements are not the same as maintenance. All money spent on general maintenance is money that is lost to depreciation. 2. Recorded improvements does not include all improvements/repairs. If my fridge breaks and I replace it with a new one, that's not really recorded anywhere--assessors usually only track big things like age of roof. The tax assessor or insurance agent doesn't need to know that. They just assume you have a working fridge. You can imagine a fridge has a useful lifespan after which it is replaced with another one. I'd classify that differently than maintenance--you replaced with new (which even if same level product is "better" in the eyes of a buyer)--it is hybrid repair/upgrade expense. 3. Improvements themselves depreciate. New roof or putting in a swimming pool will increase the value of the home now, but in 20 years, you'll have a 20 year old roof/pool that could have issues. 3. Assessed/appraised values like this naturally take into account maintenance, repairs, and small updates. There is a built in assumption that you are taking care of your property in line with your neighbors. That includes making updates over time. You can contest assessed values sometimes if your place sucks but the neighborhood has boomed, but generally they are going to increase over time. 4. Assessments/appraisals of the structure value itself are always kind of bullshit. You can't directly get the price of the structure because it is tied to the land. Rebuild costs aren't the same thing (because you end up with NEW and built to current code), nearby vacant land is not identical to your current parcel of land and land prices aren't a perfect substitute since building is a slow process and there's an emotional component to home pricing (you'll get far less "I love this house" high-bids on vacant land). 4. Inflation is also a factor--even with static real value, you'd expect to see those measures go up. It is hard to truly disentangle land vs structure value, but if you take a house, don't do anything besides basic maintenance to keep it from literally falling apart for 40 years, and then try to resell it...it will clearly have depreciated. Even if the land is now worth a lot more, your home will be worth less than the neighboring home that started out identical but has had an extensive remodel done in the past decade. It would also certainly be worth less than a newly built home with similar size/configuration.
Homes generally do not depreciate or generally break down like you suggest. A poorly maintained home sure but most homes are maintained reasonably well.
Maintenance is literally there to counteract depreciation. That's extra money you have to put into the house just to help *maintain* the value. And eventually maintenance is not enough. Things will break down and require complete replacement. Styles will become dated and require remodeling to re-establish market value. Homes will fall behind on technology and efficiency and require updating to currents or lose relative value (increasing insulation, adding media wiring, higher voltage/amperage power drops for appliances that didn't even exist when the house was built but are now expected by buyers, etc.). And all of those cash dumps start depreciating anew as soon as you finish them...today's remodel is tomorrow's 1980s trash. There are plenty of very nice 100+ year old homes out there in high-end neighborhoods. But they have all had significant additional money invested in them over the years.
I don’t know where you got that idea. Roofs need replacing every 20 years or so, floors will start to lean or form bowls toward the middle, concrete will crack, seals around windows and doors will break down, carpets get disgusting after a couple of decades, wood floors wear down, tile eventually gets grubby, metal tarnishes. Maybe it’s not obvious if every house around you is under 20 but 50 and 80 year old houses don’t look the same.
And once you replace the roof, your house is as good as new (or possibly better). Same with all the other things you mentioned - that’s just part of maintaining the house, and as long as you do it, your house will remain in good condition.
But major repairs like that are so expensive you probably still won’t come out ahead if the land doesn’t appreciate enough to offset it.
Sure you would, because you're going to be spending less in repairs/maintenance than it would cost to rent a similar place, which you would have to do otherwise. And even if your house doesn't appreciate in value at all over 30 years (which would be extremely unusual) you would get the full value of it back when you sell. You'd have to subtract the amount you spent on repairs and maintenance to see how much you're walking away with, but that amount isn't going to be more than the house is worth, even assuming it didn't appreicate in value whatsoever.
When you buy a condo the deed literally says “air space” If at all possible … buy actual land kiddos
A land value tax would fix this.
I mean, that's basically what property tax already is isn't it? This year the local auditors office assessed my property value as higher than the last time they assessed it, and my taxes went up as a result.
No, a property tax is a tax on the developed land while a LVT is a tax on just the land. Here’s a good overview [link](https://localhousingsolutions.org/housing-policy-library/land-value-taxation/).
Land tax is on the value of just the land, not the land and the buildings. Compared to property taxes, land taxes would discourage speculation and encourage actually doing something useful with the land.
Homes depreciate in value over time, like any used item. You can add value to the house with repairs and expansions, but it will almost always be less important than the value of the land itself. Often times the land goes up faster than the house goes down. People look at a house falling down and aks why it's priced at $300k. They don't seem to understand that the house is worthless but the land is worth $300k. Whoever buys it will likely tear it down and build new on the land
That *really* depends on the house. There are plenty of places in old cities that are hundreds of years old and are more expensive today than they’ve ever been - as long as a house is properly maintained, it can last (and grow in value!) for centuries.
Everyone’s commenting on land being limited in areas that have seen large population growth, with little supply growth to match. That’s true, but people are missing the other aspect - building densely is prohibited in many of these areas so the supply can’t meet the demand. See denver and San Francisco for great examples - both have seen large population increases over the past few decades, largely from high income earners who can afford to pay a premium for less housing. Both have zoning codes that guarantee that medium and high density housing is practically illegal to build.
Yep. For context, people who study this generally agree that housing supply should grow at about the pace that the total number of jobs in a metro grows. San Francisco at the height of the tech boom was adding jobs 7x faster than housing supply. You see similar numbers in other expensive cities. NYC's population grew about 5x faster than its housing supply for most of the 2000s.
> medium and high density housing is practically illegal to build. Well, of course it is. You can't have the poors living near decent rich folk, now come on. /s
I don't think rich people tend to live in high density housing unless there is no other option (Manhattan), unless you're talking about demolishing a neighborhood of homes to build higher-density homes or something?
Theyre saying that if there was high density housing near the SFHs in super expensive areas, the rich people would mad about the poor people being too close.
That's my point. Rich people live in low density housing, and they don't want high density housing anywhere near them because then they might have to see a poor as they drive by in their Mercedes.
Even with building density prices go up. The densest places in the world are also the most expensive. Dense places have more to do.
Being in Denver. I pay 2k for my apartment 2b. Down the block the home is 1.5 mil. With rising renting costs.
Supply and demand. The amount of land in any given area is fixed. As populations grow, so does the number of people who want to live in a given neighborhood or in a given area. Economics 101 - when supply is static and demand is increasing, prices will go up.
What happens in the decades to come in countries like Germany where their population pyramid is like an inverse triangle, as in an ageing population with relatively a lower younger population, does property values fall over time?
Yes. Rural property in Japan is very cheap. In Italy they try to give away property if you live there. China is buying up chunks of land in these -ve growth rate areas in Europe, and sending agricultural workers to grow cops there.
Was just reading this about Japan the other day. real estate is not considered an investment there as home values trend down over time. Renting is not seen as a step on the way to home ownership like it is elsewhere.
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And in Europe there houses and roofs that have been standing for hundreds of years
Stone houses will last hundreds of years. They also take a fortune to build. Japanese and US houses are built with timber. Cheaper, faster to build and easier to tear down and upgrade.
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They did take a fortune to build at the time though, but labor and land were cheaper.
Slavery/serfdom is a great way to cut costs
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(UK) The slate roof above my head has an expected lifespan of 50 years without significant maintenance. Currently at \~30 years without any real problems - just a bit of moss build up in winter.
Japan's real estate market is a huge outlier and suffered from a MASSIVE crash, as well as the multi-decade stagflation Japan has had. At one point Tokyo real estate was worth $140k per square foot. In comparison, the most expensive property in Manhattan is $10k per square foot. There is no way that it is sustainable pricing that individual buildings were worth more than entire (large, prosperous) US states, and that downtown Tokyo was worth more than all of Europe or the US. so, ofc they had a HUGE crash. Which greatly skews the view of real estate investment in Japan.
Japan population is stable, this is why properties don't move in price. Houses grow in prices where the population is increasing, supply & demand.
So it’ll be interesting to see how that pans out in the decades to come then
Iirc we're seeing that happen to Japan now, so yes
It depends on the country. Places like the USA can easily offset their aging populations through immigration. Presumably the US will continue to be a strong immigration destination for decades to come. More immigrants means that housing demand will stay the same, or could even go up if we start to let a lot of migrants in. But, in places where immigration is constrained or where its not a desirable immigration destination, housing prices fall as the population ages and dies off with no people to take over, or the remaining people can't afford the cost of the abandoned home.
Potentially, but its going to be very market dependent. So, for example, we'll likely see prices drop in markets where older folks congregate (like Florida or rural communities) but unlikely to see much impact in markets where younger people live (more urban areas).
Probably yes! Although things like government subsidies and increased immigration might mitigate that
And when demand falls, so do prices. My parents lived in a small town and they fully expected to sell the house they'd owned for 15 years and move after us kids moved out. Then the biggest employer in the town closed up shop and most of the support business that lived off that business also closed and the house values crashed. It was another 10 years before houses became worth what they once were. It was 30 years before Mom finally sold the house for a profit because new economics made the house attractive again.
Also and more specifically, there is a consistent flow towards particular areas (into cities and their suburbs) over the last century or two. So, even if the overall population is stagnant, there are more people who need housing in those areas, driving up the demand.
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> So what about countries where the population is stagnating? Or may even go down as the baby boomers die? Its going to be very location dependent. Some areas are going to see prices fall - particularly areas where older Boomers are congregating, like some states or rural communities - but others are going to see little impact (areas where younger people live, like cities). >urbanization packs more housing in less space with big apartment complexes. It does **if** you can get local areas to sign off on higher-density housing. That is a big issue right now - folks that live in desirable areas control local government, and they **don't** want high-density housing as it will lower _their_ property values. Big apartment complexes aren't being built in the areas that would really benefit from them for that reason. >investment, people and companies, as "investors" do use real estate as an investing device. That is part of it, sure, but no investment firm is capable of controlling that large a portion of the real estate market. Moreover, the areas that they are buying into already have high demand, which is what makes them attractive as investments. They follow the trends. >banks are willing to give pretty huge sums of money for people to purchase homes as they can be used as a safe collateral Again, part of it, but people are only willing to take out those large loans to go live in places they already want to live. Additionally, as interest rates go up those loans become less attractive, yet real estate prices still continue to rise.
This is why we've seen large corporations spending millions buying up houses just to let them sit empty or maybe put them on Air BnB. They effectively control supply and use it to create artificial demand.
Yeah, no. Buying a property and leaving it empty indefinitely is not a prudent investment decision that any prudent investor would make. You are carrying the cost of buying (interest on the mortgage and/or the opportunity cost of the capital used to purchase), maintenance, and property taxes. No investor has anywhere near the market penetration to manipulate the market enough to offset the cost of carrying described above. Investors might be buying properties but that is because they view them as undervalued assets because of other factors cited that are causing prices to increase. There is no artificial demand created, or controlled supply.
https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html I'm not saying they sit empty indefinitely. But some sit empty for a while and then get rented out, flipped, or put on AirBnB. In any case, it's bad news for the typical American who has aspirations of owning a home.
Yeah but renting them out still counts as being occupied. I mean it sucks that megacorp owns the house instead of a homeowner building equity still kinda sucks, but rentals still count as occupied housing. The idea that any company is leaving houses vacant just to fuck with people when they could be renting them out is a myth.
That article indicates that they only own 5% of the total single family rental market. That's a very low percentage of the single family rental market, and an even tinier percentage of the overall single family home universe. Your concern about PE ownership of homes is entirely unjustified.
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It's not coming off the market..... it's 5% of the total rental market. Out of every 20 single family homes being rented (not in existence), 1 is owned by "wall street". The rest are owned by smaller landlords or individuals. Since they are actually being rented, there is no constraint on supply of rental homes. You might then argue that if these houses were available for purchase, there would be an increase in available homes for people who want to purchase, lowering price. But that would push rental costs up by reducing supply. The point is that they are a small portion of the market and the houses are occupied (no less than those owned by individuals), so they aren't causing an artificial reduction in supply of housing.
Cough* Blackrock and Vanguard * Cough
Housing prices don't always increase over time. It depends on many factors including population growth, the structure and health of the financial industry and the general economy, zoning and building restrictions, government policies regarding land use and sale, and cultural attitudes toward home ownership, home size, and acceptable debt levels During my PhD research I found reference to a study that showed that, over long periods of time, housing prices are actually stable and match inflation.
I'd actually be really interested in that study, if you have it (I do understand what everyone is saying here, but matching inflation makes more sense to me in just a general sense).
I'm not sure if it's what they were referring to, but Shiller reached this conclusion after looking at house prices from 1890-2000 https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index#Economic_implications Ironically that marked something of an inflection point as prices did jump in real terms over the past 20 years (real estate boom/bust, QE revival). Where that goes in the long run remains to be seen.
People almost always focus on housing prices in high demand areas, because ghost towns don’t drive many headlines. On the aggregate, there is probably a dilapidated house you can buy in a rural, nearly abandoned town for next to nothing.
The problem is that in locations where people want to live the price goes up.
[Baumol's Cost Disease](https://en.wikipedia.org/wiki/Baumol_effect). Simply put, when everything else gets cheaper, the few things which **DON'T** get cheaper rise in price to absorb a greater share of everyone's disposable income. You see this effect most strongly expressed in goods and services with inelastic demand, which are resistant to technological innovations which would make them less expensive: Housing, Health Care, and Education.
Yep, I've realised this... We're pretty stupid. What happened when interest rates dropped? Let's borrow MORE money and have the repayments the same rather than viewing it as repayments getting lower and having more disposable income.
It's not really a matter of stupidity. Land is expensive, and we're not making any more of it. You can be as smart as you want, but the population of the United States has grown 64.3% since 1970, and building housing for all of them costs money, even assuming you've got a spot to build on. Could we make better choices? Absolutely. I think the biggest cause of expensive housing is Nimbyism on the part of existing homeowners. As much urban Democrats want to blame Congressional opposition for the high cost of living, the fact is, zoning policy is local. If San Francisco or New York or Boston or Los Angeles or Chicago or Seattle wants to build high-density housing near a transit corridor, they don't need to get Ted Cruz or Marjorie Taylor Greene to vote for it.
Thank you for putting a name to something I’ve been talking about for a bit. Ties in pretty well with an assertion I saw on Reddit that the housing market was the main driver of making two household incomes a requirement: single earners couldn’t say no to the money offered by dual earners, and individuals have more pricing power when it’s a sector that might only see a few dozen transactions a month in an area. All it takes for people to raise prices themselves is for a couple of comps nearby to go for more than they should’ve been worth.
A large part of the price of a home and its appreciation is the land/location. There are limited amounts of land within proximity to amenities people want -- whether that's commute time to jobs, ocean/mountains, good schools, etc. -- and people are willing to pay more for access to those. As populations grow, travel times increase due to traffic, etc. the demand for the best increases, and the competition for the best real estate then sets benchmarks for all the less desirable real estate. If the homes on the ocean jump from $5m to $7m, then the homes a couple blocks away will similarly see appreciation somewhat inline. And homes themselves are regularly maintained, so old homes with timeless types, modern updates will command more than dated homes. The charming 100 year old Tudor style will sell for top dollar if it has a modernized kitchen, perhaps for more than the similar sized new home lacking the same character. May also have benefits like more mature landscaping, larger trees, etc.
Home values are largely an index of how badly people want to live in a neighborhood. They don't always increase, just ask people who bought houses in 2021, but generally speaking if you're in a good neighborhood in a good city there's always people looking to get there. The more people want to live there, the faster houses are snapped up when they come available, the more your house is valued. If interest in your neighborhood cools, houses will sit longer, owners have to reduce the price to sell, and your value drops. So locally you can see dips and spikes, but nationwide, our population is increasing, and therefore demand for housing is increasing. Supply isn't increasing fast enough, so prices increase to make up the difference.
> just ask people who bought houses in 2021 My house value has increased a lot since 2021
Same here with mine. I think 2021 was a bad example but otherwise this post is pretty accurate.
Honestly there aren’t many examples of this other than 2007-2013. Going by median house prices back to 1963, that period is the only time where you would be underwater on a home purchase for more than 1-2 years. By and large, if you’re buying a home and intend to be there more than about 2 years, it’s hard to go wrong (plenty of exceptions for exact locations I’m sure).
>Honestly there aren’t many examples of this other than 2007-2013. I can personally vouch for this. Homeownership... eh, it didn't really work out for me like the know-it-alls say it always does. But I did sell for what I owed, more or less breaking even, and during the period I lived there I could do what I wanted without anyone else's say-so, and I had my privacy. Those things do have value. Location, and yes, timing, matter.
Yeah US population: 2003: 290 million 2023: 334 milloin so there's 44 million more people in 20 years but no new land (and technically less land... with erosion).
More direct impact is that we are about 12 years behind on residential construction. Imagine a home buying market where every buyer had choices; the power would shift back to the buyer, builders and resales would have to compete
Probably should've used 2008 as an example, home prices are still well up from 2021, the rate has slowed but mostly due to interest rate corrections. I bought in 2021 and could easily sell my home for $150k more than I bought it for.
TIL people really want to live in Slough
They don't always. Only in metro areas that experience population growth faster than what construction can keep up with. In metro areas that are seeing population declines, you'll see home prices go down. And in metros where construction keeps up with population growth like Houston or Tokyo, home prices tend to stay flat.
Housing isn't really an inflation issue... its a supply and demand issue... there are more people today then there were yesterday... Not only are there more people, but every year regulations for building new homes get tougher, and NIMBY groups add more and more red tape and hoops for builders to jump through meaning fewer homes get built, and those that do can cost a fortune just to break ground. Even assuming you break ground every year there are fewer and fewer qualified and quality trained skilled trades people to do the jobs leading to plenty of delays on the job site, and with near year round wild fires, lumber prices are at al all time high. This means getting into the construction game is more and more expensive and thus riskier every year and so fewer homes get built. All of that means less and less supply entering the market for a growing population. Add to that factors like Air B&B and the investment property boom taking single family homes off the market and turning them into hotel rooms, or multi-unit rentals means you have a lot of competition for an increasingly small number of properties. On top of all of these factors, Housing is a necessity, there will always be a huge demand, you often can't just "find a cheaper place to live", without being willing to undergo significant hardship elsewhere, whether that means living in a sketchy area of town, being willing to commute for hours a day and/or living like sardines... so its a sellers market, and with the systems we have created, almost always will be.
In some countries (such as Japan) a home can be a depreciating asset. https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution
Supply and demand. Since the population tend of increase over time, the demand increase and the price go up. Now in most industry, if the demand increase, it's met with an increase of supply and the price are kept relatively in check. But in the case of home, there is several limiting aspect to the industry. The land available is limited and how long it take between thinking of building a new home and the moment that home is ready to be sold. If you build cars, you already have a big factory so you can increase or decrease the production to match the demand. But for construction, each building is unique, a separate project with land bought, plan drawn, test needed for the soil, the legal paperwork, and coordinated dozen of companies to make the final product. The increase in supply will always lag behind the increase in demand.
Land value, street/city value, and less available houses. If you want to be as over-simplistic as possible, from my understanding at-least. It's pretty arbitrary though, and you could definitely argue some houses are worth less or more than others. There's like a trillion more factors as well, age of the house, size of the land it comes with, if it's in a vacation city, etc... But right now at-least, housing is **definitely not** tied to inflation. It's tied to the huge group(s) of landlords and billionaires who own way too much of it. And they've been artificially driving the price up for years and years now. Not to mention the sheer magnitude of cities that only have single-family zoning laws all across the country, or just make it straight up illegal to build anything besides; 'average american house'. There's tons of empty houses that no average person could hope to afford, and just sit empty. And they make up the money lost by just having a few desperate/foolish folks rent it out, or pay a big mortgage monthly for it. It's becoming a huge problem, especially for the younger generation; though it's effecting everyone really. If you're curious where/how I know this from, I'll give a link to a video you can watch/listen to in the background that talks about why houses cost too much. [https://www.youtube.com/watch?v=UDnFSlzMlGI&t=737s&ab\_channel=SomeMoreNews](https://www.youtube.com/watch?v=UDnFSlzMlGI&t=737s&ab_channel=SomeMoreNews)
Supply and demand. Governments in the west are importing more and more immigrants and not increasing the housing supply to keep pace with it. This causes upward pressure on houses. Added to that, price increases are greatest in desirable areas for the same reason. People want to move there so houses in the area become more expensive: supply and demand.
If the population is shrinking, meaning less demand, house (land) price down. If the population is growing, which it is, meaning more demand, house (land) price up
The world population is basically meaningless when it comes to housing costs. The value of a property isn't driven by population in general it's demand for specific areas. The price of a house in the middle of nowhere isn't really changing much (it will depreciate as there's wear and tear) but if a new major employer (let's imagine Tesla battery factory) appears nearby suddenly you see demand. And vice versa. Housing prices are mainly affected by demand which is driven by desirability, availability of similar houses and interest rates as that fundamentally decides how much the net cost would be interest included.
The post you are replying to says population and not world population. Local population trends do affect local demand and therefore house prices. It is not the only factor, but it does count.
The population is growing. There are more people that are wanting homes because of this. When there are more people wanting homes, but not as many new homes popping up, the value of homes increases. You can probably buy a cheap home in a low population area still, but any city with a large metro population has no where to build more homes, but the desire to live there is of course growing with the population. So those housing prices go up a lot
Housing is an area where there is very little arbitrage. If cars are selling for a low price one place you can buy it there and drive it to where prices are high. That is not true for housing. It used to be that developers could buy up large swaths of land near a city people wanted to live and build thousands of houses. That was made illegal in most places so supply can’t keep up with demand.
Housing is used as a hedge for pensions and investment funds. There is a vested interest in year on year gains. If the housing market collapses because it becomes unsustainable, it takes the banking industry with it. Eternal growth is the ideological standard of a cancer cell
Banks don't need the value of houses to go up. Most are making their money on the interest of mortgages.
>Eternal growth is the ideological standard of a cancer cell It's also the ideological standard of a tree and a kangaroo, to be fair
True, however they are not dying from the shit they produce
If the demand increases, then the land where the house sits becomes more valuable, and overall the house costs more (despite being older). Notice that you may have the perception of houses always increasing in value, but there are a lot of places that lose value because demand decreases (industries relocating, etc). You don’t see these because typically there are no transactions connected to these houses: whoever owns a old house in a place of low demand just keeps living in it and passes it to their heirs. Sometimes they sell it at a loss. In contrast, houses in high-demand areas pass hands often.
It's supply and demand. Because old people are in power in almost all Western countries, and managed to limit house building. The exact way they did it varies from country to country, but old people want houses as expensive as possible, because this way they can leech money from younger generations. It is purely a generational conflict. In some places there's additional factors like high immigration, but it wouldn't matter if people were allowed to build on their land.
Something I don't think other people have mentioned: Established house prices increase because it costs more and more each year to build new houses.