🔔 The Future Of Housing

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REGULATORY DISCLAIMER: The following article contains speculation about 'the future', a mysterious time notorious for it's unpredictability.

It also contains my favourite kind of conspiracy theories...

I have NO time for shape-shifting reptilian overlords.

However, if you tell me about another battle between the elites & the little people...

The reason I love these kinds of theories?

There's always a grain of truth in them.

(There's normally a bucket of misunderstanding to pick through too, but that's not the point!)

This story in the Wall Street Journal was immortalised in this viral Twitter thread. 👇👇👇

Why are BlackRock doing this?

Is it all part of the Great Reset as the thread-starter implies?

Well, no.

BlackRock are only mentioned once in the WSJ article as 'one of many firms' that buy homes.

There's no mention of any recent buying.

According to this article in The Atlantic, BlackRock actually owns approximately 80,000 of the 140 million homes in the U.S.

In 2018, BlackRock's real estate assets represented just 0.35% of the $6.4 trillion in assets under management (now >$9 trillion)...

So, if the Wall Street Vultures aren't to blame, what's going on?

Low interest rates have fuelled a speculative 'housing bubble' and it's got at least one Fed member worried 👇

But he really doesn't need to fret.

There won't be a bust.

The last housing crisis was fuelled by sub-prime lending.

That isn't the case this time.

Low rates and an undersupply of housing in high-demand areas are behind the price increases and that won't change quickly.  

👆 Does not apply to housing 👆

Aside from the natural allure of home-ownership, we live in a yield-starved world.

Property investing has been a popular way for private individuals to protect their wealth and generate extra income through rentals.

It's also a tangible asset, so "you can never lose everything", and if you distrust those banker types, you would rather put your money in a 'safe as houses' investment...

But it's causing a problem.

Housing is getting ridiculously expensive.

For those with access to capital (and loans), it's cheap to borrow.  

For those at the lower end of the income scale, it's impossible to even scrape together a deposit.

This is definitely a 'something must be done' type of problem.

What's a good policymaker to do?

• Hike interest rates? There's a bit of leeway to return to pre-Covid rates here, but hike too much and the whole economy comes crashing down. Money (debt) will likely remain cheap.

• Increase property and capital gains taxes? Could be appealing to deter speculators.

• Limit access to borrowing for second homes? This could work too...

In New Zealand, legislation was passed in March to dis-incentivise property speculation.

It's not exactly draconian, but if there's one trend that I would bet on, it's more of these attempts to 'solve generational housing inequality'.

Housing affordability took down the Swedish government last week

With governments in charge of this, we will see the usual tools deployed:

More regulation and increased capital gains taxes, fewer loopholes, and greater rights for tenants.

Access to capital for investment homes will be restricted by lowering Loan-To-Value ratios.

Does this fix the problem?

Of course not! But it might be enough to win an election or two.

All roads lead to a greater institutionalisation of property speculation.

Hear me out.

Those with capital or access to capital will set up companies and become professional landlords, owning & managing a portfolio of properties.

In bulk, they can deal with the regulatory burdens far more efficiently and a company has much easier access to capital (and tax efficiencies) than an individual.

Yield-hungry investors will pile into property investments while rates remain low.

Eventually, private speculators will be crowded out by these barriers.

And if these companies offer dividends, you can bet pension funds and investment firms will be happy to keep on providing the capital.

The hunt for yield is all that matters.

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