Comment by AnthonyMouse

Comment by AnthonyMouse a day ago

> If some sectors of the economy become drastically more efficient, and some do not, overall society has become wealthier, even if the prices in the latter sectors rise a lot.

That's assuming all sectors have become more efficient. Some, like construction, have become less efficient. And that's a big problem when it's relevant to necessities like housing.

Suppose people used to spend 20% of their income on housing and healthcare and 20% on apparel and electronics. Then housing and healthcare triple in price, apparel drops by two thirds, electronics drops by 98%, and everything else stays the same. Are they better off? No, because the most you can improve the cost efficiency of something is 100% (it becomes free), but the things that that cost more can increase in cost by more than 100% of the original cost, and some of them have.

AnonymousPlanet a day ago

> That's assuming all sectors have become more efficient. Some, like construction, have become less efficient. And that's a big problem when it's relevant to necessities like housing.

Housing prices aren't going up because of construction costs alone. The biggest increase is from the cost of land. For that the cost of a house on top has become less and less relevant. If construction became really cheap, prices would still trend upwards since there's always some billionaire's money to be parked somewhere.

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AnthonyMouse a day ago

The biggest increase is from the cost of zoning making land artificially scarce. But construction costs layer on top of that because of the nature of it: Instead of being able to build 20 new housing units on a lot that currently only has one and enough land to add more without destroying the existing building, adding more is now restricted to a small strip of the downtown where the lots already each contain 10 housing units. Which effectively doubles your construction costs to add 20 housing units because you still have to build 20 housing units but now you have to destroy 10 in order to make space, and then do that twice to actually add 20.
Which is a disaster if construction also got twice as expensive.
> If construction became really cheap, prices would still trend upwards since there's always some billionaire's money to be parked somewhere.
If construction became really cheap and there wasn't an artificial limit on how much housing you could build on a given lot then there would be tons of cheap housing and billionaires wouldn't find it a useful place to park money because it would have lower returns than competing investments.

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- AnonymousPlanet 11 hours ago
  
  Even if construction would be zero it wouldn't make more than a dent in the overall trend because the investments are done into land not houses. This is also why zoning doesn't matter. Look at the big picture. Pretty much every argument you made can be easily refuted by looking at any other jurisdiction that has completely different zoning laws and completely different construction prices and yet prices for real estate are skyrocketing the same, regardless of use. What those areas do have in common: general availability of real estate to international investors.
  Properties aren't bought up anymore to develop them or have any returns from use. They are being bought as a non-depreciating asset. Want to effortlessly park money and not have the money rot? Buy land. Never mind what happens to stand on top of it. You can see more and more of those rotting real estate plots all over the western world. And there's always someone who wants to park money.
  Your thinking isn't wrong on a smaller scale. All those aspects matter for a local housing market. But the overall trend is governed by something else.
  
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