I am surprised the baby boomers aren't downsizing in droves at this point. They should be the ones getting out of homes, locking in their gains and grabbing a condo where they don't have to spend too much effort doing maintenance. I suspect some are holding onto their homes for their children's sake?
Based on people I know, I think a lot of it is that if you own a typical suburban/exurban house and you have the house like you want it, you like the location, you have friends in the area, etc., for many, it's just not worth the trouble/expense of moving even if they could potentially downsize. The exceptions that come to mind are a few people who wanted to move to a warmer climate and/or adopt an urban lifestyle with their kids out of the house.
What will happen to their houses? In some cases, they'll become their kids' residences. In other cases, their kids will now own TWO properties, and now they'll rent out the 2nd house, adding supply to the rental market. In still others, the reverse mortgage scumbags will own the property, and it'll add to the corporate-owned housing stock.
I agree. Entrepreneurship will increasingly become the domain of the rich (or rather, the children of the rich).
It's tragic any way you slice it.
>Also these higher prices skew the economy.
Pricing is how an economy works. It is the messaging system communicating changes in demand/supply balance. If it is 'skewing' the economy in the sense that it causes changes, then it is working as intended.
>When people are tied up in these ever increasing loan/income ratios
There is only so much land to go around so if you want to use a particular piece of land that is highly desirable then you ought to outbid everybody else.
>I believe we should look to ensure affordable housing for owner occupiers.
the solution to this is georgian land value tax. There is no reason otherwise to ensure 'afforable housing for owner occupiers' except your personal belief that society should subsidise a particular class of property ownership whereby the owners use the property directly. What is going to happen is that people who cant afford to own a house (or dont want to borrow money from banks to buy one) is going to have to pay the tax for renting.
Price is one tool. Government skew pricing via subsidies and other to business all the time. Imagine primary schools in a pure capitalist system. It would be a mess. There is loads of intervention all through the economy that overrides pure pricing so I dont buy into this view.
> There is only so much land to go around so if you want to use a particular piece of land that is highly desirable then you ought to outbid everybody else.
Land supply is fixed. But demand is variable. If you reduce investment incentive for this limited land pool, prices should reduce via less competition freeing personal capital for other spending.
> What is going to happen is that people who cant afford to own a house (or dont want to borrow money from banks to buy one) is going to have to pay the tax for renting.
Maybe... 1) there were studies in Australia when the gov removed tax breaks on investment property. Some people made a claim similar to you this cost would be passed on. Empirical results were the majority of regions (some exceptions of course) found little to no impact on rental price and this cost was absorbed into investment returns. And 2) Don't forget this action will reduce house prices, so those that do buy residential property for investment will require lower rental return as the initial house price is lower.
And small community business, how will they exist in the future. If someone wants to set up a local 'physical presence' vet/daycare type business that are typically mixed into residential areas the threshold is now so high ot exist and especially set up a new business. How can a daycare buy a million+ dollar house and expect to make money paying that back on having 30 local kids being looked after.
Also what is going to happen with retirement and periods of unemployment. I suspect society will be less stable as either the government has to foot high rent costs (unlikely) or we will see increased population movements during retirement, and now the government has to look after older people that before a family who lived nearby could help out with. And during low employment cycles society can absorb this downturn if people dont have large loans. Historically people cant 'tighten belts' for a year while things improve, harder when your neck deep in debt. So we will again see more movement of people, debt default etc. It will serve to exacerbate recessions etc.
Also these higher prices skew the economy. When people are tied up in these ever increasing loan/income ratios there will be less spending on dining, holidays, hobbies etc. It will weaken the economy by concentrating the spend in limited areas.
I believe we should look to ensure affordable housing for owner occupiers. Residential investment need to be discouraged (note I'm not saying stopped) as a speculative asset class. I've seen a few suggested methods to achieve this but I feel the simplest is to place a yearly 'asset tax' on non-owner occupied residential property (I would also include farms). Having a % tax would make it easy to adjust to find the right balance given economic cycles change. Also this would encourage property hoarders not in heavy debt to sell for lower taxed asset classes. This I feel is important as most solutions focus on controlling the investment lending side which is limiting in reach.