Are renters responsible for the high price of property?

westernpromise

It occurs to me that they may be.

Traditionally, if you think the value of something is too high, you short it. That is, you borrow it so you can sell it at the high now-price and buy it back later at a cheaper price, pocketing the difference. This has been done since the year dot in equities. If you think Unilever's going to fall you short the stock, borrow stock (for a price) from say a pension fund that's holding it, and deliver these borrowed shares to whomever you sold to. You now owe that pension fund some shares, so you buy back after the price fall, and you use these shares to pay back whomever you borrowed from.

This is pretty expensive, and prohibitively so with something like Bitcoin. But if it is expensive to short an asset, this in itself is going to keep the price of that asset high.

To bet against the price of bedsits in Edinburgh, you've got to borrow (i.e. rent) a property, and then continue to pay the owner (landlord) for its use for decades, while you wait for its price to correct.

Demand for rentals, from property speculators seeking to short housing in this way, has made shorting so expensive to do so that most don't. And it is this that keeps prices high. Short property for long enough - rent somewhere for long enough - and you could end up down by 130% of its buying price. Most can't risk this and buy instead - which gradually pushes up the price of houses out of the reach of the shorts, who are forced to keep kicking the can down the road because they can't afford to buy a new one.

Crashtrolls, in short, can't afford to buy because of crashtrolls.

NineDeuce

Yes for quite a large part although they are only playing the system which makes renting the only option for tenants.

It certainly isnt a case of supply and demand. It is a case of pay or have nowhere to live.

westernpromise

NineDeuce wrote: »

Yes for quite a large part although they are only playing the system which makes renting the only option for tenants.

It certainly isnt a case of supply and demand. It is a case of pay or have nowhere to live.

Perhaps for some people, but there were people speculatively shorting property 20 years ago. That wasn't because it was expensive, it was because as cheap as it was, they thought it was going to get even cheaper.

So they piled into renting and made it so expensive that buying looked a good deal for the next 20 years. At that point the spec shorts of 20 years ago can no longer afford to buy but it's thanks to their own shorting.

GreatApe

Property is not high priced
Only ~3% of UK born brits rents privately long term (>10 years) which means 97% dont.

Rents in most the country are also not high priced, in much of the country rents are not much above social rents despite landlords having to pay stamp duty, S24, 20%-45% income tax, 28% CGT, IHTs etc all of which social landlords avoid.

NineDeuce

westernpromise wrote: »

Perhaps for some people, but there were people speculatively shorting property 20 years ago. That wasn't because it was expensive, it was because as cheap as it was, they thought it was going to get even cheaper.

So they piled into renting and made it so expensive that buying looked a good deal for the next 20 years. At that point the spec shorts of 20 years ago can no longer afford to buy but it's thanks to their own shorting.

So how is that the fault of people who arent even old enough to have been able to buy for 20 years?

westernpromise

The rise in both the incidence of renting and in house prices has been fairly steady over the last 20 years. I am suggesting a mechanism by which the former causes the latter. Anyone who has contributed to making it expensive to short property has contributed to this effect.

Eric_the_half_a_bee

westernpromise wrote: »

Traditionally, if you think the value of something is too high, you short it.

The immediate effect of shorting is to increase the number of shares on offer for sale. other things being equal, this increase in supply drives down prices.

I don't think that renting increases the number of properties on offer for sale.

LdnFtB

I think in the context of property you can only say that those who have sold to rent are the ones who have taken a short position.

The majority of renters do so because they don't have the deposit or the income to support a mortgage, those who do so because of an investment decision are very much a minority.

Thrugelmir

Demand is high. Interest rates are low. Favourable times for those leveraged with debt. Though there's a progressive chipping away that is reducing the attraction. Which in time may turn the tide.

Cakeguts

Some people prefer to rent because is suits their lifestyle. If you have a job that means you move a lot or you don't like saving or having surprise bills for house repairs then renting makes sense. It is not always to do with how much cash you have or don't have.

GreatApe

Thrugelmir wrote: »

Demand is high. Interest rates are low. Favourable times for those leveraged with debt. Though there's a progressive chipping away that is reducing the attraction. Which in time may turn the tide.

There is no tide for there to be a tide to turn

Private renting in the UK increased through 2004-2017 due to migration a recession and tighter regulations.

Even despite that only 3% of uk born brits ever rent privately for 10+ years of their life and some of them are people who both rent and own like a friend of mine who owns a house in the midlands but rents a 1 bedroom flat in zone1 London

97% do not face this housing problem the bears have manufacturers up

If only the media took the time to investigate this properly we would not have people running around like headless chickens crying housing crisis while ignoring the fact that we have much more housing space per capita than at any other point in our history