Why have house prices increased so much over the last twenty years?

GreatApe

economic wrote: »

If you had invested in Google, or Nvidia or Tesla or other companies a few years back involved in AI and driverless cars, your return on capital would not be zero or negative. It would be in real terms a fairly large positive number. this is because these companies need capital to deploy in the development of these new innovative products and are expected to generate large sums from the sale of these products. return on capital in this sector is clearly not negative.

Of those companies Tesla is the only one that is more specific to self drive tech
Tesla has a market cap of $50 billion but so far have been burning capital
If the world was to end tomorrow aliens wrote a history book it would say something like Tesla a automotive company that lost $10 billion in capital.

Its share price is based on future hope. I think Tesla will do well in the future but to date its been destroying capital the fact that its shareholders are trading shares among each other at ever higher prices doesn't mean it has created capital returns. In the same way bitcoibs trading at $300 billion is no proof of capital created or positive capital returns. It's just people blowog up a bubble

Anyway let's say Tesla is successful and its shares go up in price 20x and it becomes the worlds first trillion dollar company. Great lots of positive return on capital for Tesla. But what happens to all the other companies? Do the other car companies with say $1 trillion total market cap go down the toilet? What about the airlines that lose customers to cheap long distance self drive taxis? What about the oil companies? What about the car insurance companies? What about the TV stations and media outlets that get advertising earnings from car commercial etc

While I agree and accept self drive tech is going to be a $1 trillion + return story for the company or companies that crack it I am not convinced its going to be a net +$1 trillion. It could well be a net negative number. While Tesla gains $1 trillion other companies lose >$1 trillion.

Once driverless cars hits our roads, sure productivity would rise. more wealth would be created as you say. but wealth can not be created with zero or negative return on capital.

Of course it can. Take housing. If I could magic up 5 million homes over 5 years into he UK what would happen to house prices? They would crash hard. The total £££ value of the capital would go down. The actual built capital is up 5 million units people are housed better but the return on capital would be negative for the owners of the current 28 million UK homes. This also highlights a problem with how we measure capital. Surely a UK with 5 million more homes is richer even if the total net wealth of the country is lower as a result?

Its impossible. There are other areas that need innovating as we are not nearly there yet in terms of full scale automation and AI across all areas of our lives. I think what you are trying to say is that return on capital would fall to zero as the wealth generated from our own productivity has no where to go. Well that may be the case but its not a certainty.

Bonds are already negative

Housing will obviously go negative once we reach peak population around 2050 and are done with meeting housing needs. We will continue to build hones past that point and second hand homes will go well below build costs as second hand cars are well below build cost today.
Industrial and non prime commercial will go negative for the same reasons

Tech will make energy go negative

Commodities will go negative as governments with tech enabling the possibility go to a recycling economy

GreatApe

Ultimately general AI will come and at that stage the value of almost all assets fall to zero.
What's the point saving and deferring consumption for 30 years if in 30 years general AI arrives and everything becomes free. It would be putting money in stock markets that keep going up until a few months before general AI is deployed then all the markets go to zero. Even if you cash out a few years before this happens you only have those few years to spend the money before AI makes that worthless too.

Very few if any things will hold any value in a general AI world.
This shouldn't be a negative story it means people will be immensely rich in 30 years time but that will be true for people who didn't save a dime as much as it will be true for people who saved every single penny they could. People who saved would find they had a -100% return

I think the chances of this happening are very high. The only problem is timing
It could come as early as 10 years from now or as late as 100 years from now.
My best guess is sometime around 2030-2050

The speed of the change post say 1 could also be amazing
The machine could exceed the sum of all human knowledge within days
It would take a little longer for the machine to build out the capital and infrastructure to take humanity towards a type 2 civilisation. That could happen within a few years.

Percy1983

Cakeguts wrote: »

This is a huge generalisation probably due to reading certain newspapers.

I am a landlord and we don't buy 1st time buyer properties. We let to families so a 1st time buyer property suitable for a couple or single person is no good to us.

The problem with that statement is first time buyer homes and family homes are now on in the same.

As with me and many of my friends our first house purchases where family homes, this was due to the length of time needed to establish a career and save a deposit lead to us buying in our late 20s to which many of us where already at the stage of planning to start a family with the next 5 years. So to buy a 2 bed terrace to then move again in a couple of years just didn't make sense.

In short we all bought 3-4 bedroom semi detached houses, in my case that includes are rather large garden.

MobileSaver

GreatApe wrote: »

Ultimately general AI will come and at that stage the value of almost all assets fall to zero. ... I think the chances of this happening are very high.

Huh?!? Why would my house suddenly become worthless just because a machine can think like a human?

ukcarper

MobileSaver wrote: »

Huh?!? Why would my house suddenly become worthless just because a machine can think like a human?

Terminator :eek: .

Cakeguts

Percy1983 wrote: »

The problem with that statement is first time buyer homes and family homes are now on in the same.

As with me and many of my friends our first house purchases where family homes, this was due to the length of time needed to establish a career and save a deposit lead to us buying in our late 20s to which many of us where already at the stage of planning to start a family with the next 5 years. So to buy a 2 bed terrace to then move again in a couple of years just didn't make sense.

In short we all bought 3-4 bedroom semi detached houses, in my case that includes are rather large garden.

I think you are going to find that it depends on the area you are in. In most towns in a cheaper area some 1st time buyers can afford something. However there are landlords who buy properties in the most expensive areas of any town or city. They are not competing with first time buyers.

You can't generalise. Some landlords buy in the most expensive areas and let to well off tenants. Some tenants rent from choice not necessity. They often choose to rent in expensive areas. It isn't often what it is that makes a house expensive it is where it is. Our family homes are not 1st time buyer properties mostly because of where they are. Some are not 1st time buyer homes because of what they are as well as where they are. There are other landlords like us. Not all landlords buy the cheapest properties in the least desirable areas. Some buy in the cheapest areas, some buy in family areas and some buy in expensive areas. It depends on where in the market they are operating.

Malthusian

MobileSaver wrote: »

Huh?!? Why would my house suddenly become worthless just because a machine can think like a human?

I think by "general AI" MobileSaver is talking about the hypothesised Singularity where humanity creates an AI superior to itself. Because the AI is superior to humanity, and humanity is capable of creating an AI superior to itself, the AI is also capable of creating an AI superior to itself, and the AI it creates can create a superior AI, and so on and so on. The moment that humanity creates an AI even a fraction superior to itself, almost immediately an AI will be created which will be the closest thing in reality to omnipotent.

As it runs on computer circuits, the Singularity AI doesn't need thousands of years of biological evolution or trial and error to improve itself like we did.

This near-infinitely-intelligent AI will invent everything there is to be invented and will use self-replicating machines to fulfil everything that humanity could possibly desire. Or it will wipe us out. Either way the price of all assets will drop to zero. (Which is not the same thing as all assets being worthless.)

zagubov

Cakeguts wrote: »

I am not sure where you got this idea about France from? Many people in France rent their homes.

Also they are not all big and spacious. http://www.fnaim.fr/annonce-immobiliere/41398361/17-acheter-maison-vayrac-46110.htm

http://www.fnaim.fr/annonce-immobiliere/40443374/17-acheter-maison-betaille-46110.htm

I'm not bothered about whether the French own their own homes, and I'm not sure they do either. The figures I've seen for average floorspace areas per home are 112 m2 to 76 m2 for France and the UK respectively while the average floorspace per person was 43 m2 and 33 m2 respectively.

Even Japan has more floorspace than us.

GreatApe

MobileSaver wrote: »

Huh?!? Why would my house suddenly become worthless just because a machine can think like a human?

Its hard to know what happens post AI. Everything is possible including humans and machines merging into some form of hybrid.

Anyway the reason your homes value will crash is because once we have general AI it can build things for us much quicker and much cheaper than humans. A home that costs £200,000 and takes 9 months to build might become a home that costs £2,000 and takes 9 days to build. We could go from building 200,000 homes a year to building 2 million homes a year until home prices crash towards the marginal cost of production.

qwert_yuiop

zagubov wrote: »

The unit of society in Germany is the family and in the UK it is the individual. That may lead to a disparity in the number of homes.

But there's more to it. In Germany/France people live in large spacious homes until they die. Then their children live in large spacious homes until they die, ad infinitum.

In the UK, the distribution between generations is less favourable, as house tenure systems don't match needs. Growing families over-occupy their homes while separated/widowed older people under-occupy their homes. Still the average number of rooms/area of floorspace per person probably averages out not so bad , so who cares?

Yea, cause no Germans live alone.