Comment by jaredklewis | Hacker News Reader

Comment by jaredklewis | Hacker News Reader

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All seems perfectly consistent with the OPs point to me.

Speculative real estate investment is a direct result of restrictive zoning. Consider for example an already developed area of a city that is zoned for single family residential. This makes it illegal for a developer to increase supply in this region by building, say a duplex. A developer is allowed to rebuild a house, but not increase supply.

So of course there is speculative investment! Owners have a legal guarantee of resource scarcity. It’s the reason governments everywhere try to avoid deflation; it causes everyone to hold onto their cash.

Now contrast the situation when a developer can turn a house into a duplex. Supply is elastic. There’s no legal guarantee of scarcity. Of course real estate is still an investment vehicle, but there is no longer the artificial constraint on supply.

I also think it’s weird to lump this in with environmental protection. Preserving natural areas is an unassailably important priority for any nation. What does that have to do with home owners that feel they have a legal right to not live next to a condo? I don’t think the parent (or really anyone here) is advocating we develop undeveloped land.

Finally, I wonder if this is all moot, because the issue at hand is a restriction of foreign ownwers. Won’t native NZ real estate companies be glad to step in to fill the void? Can’t these companies then just shell shares to international investors?

There was no zoning at all in the United States when this occurred:

https://en.wikipedia.org/wiki/Chicago_real_estate_bubble_of_...

""" As a result of these factors, prices for land in the Chicago Loop rose from essentially nothing in 1830 ($800 per acre in 2012 dollars) to New York levels by 1836 ($327,000 per acre in 2012 dollars), a 40,775% increase, with even higher prices around Dearborn Avenue and the Chicago River.[3] Furthermore, Illinois in general experienced a huge boom in real estate prices and town foundations. Walters estimates that the foundations of 1/3 of all towns ever created in central Illinois occurred between 1835 and 1837.[4]

In 1837, there was widespread panic due to credit tightening from England. On May 29, 1837, as depositors began to withdraw money en masse, Illinois banks suspended payments. As these banks fell into bankruptcy, Illinois’ internal improvements, like the canals that were supposed to be financed by the banks, stopped. This led to considerable uncertainty as to Chicago's future, and combined with a general lack of credit, caused Chicago real estate prices to fall approximately 88% from their peak by 1841.[3] """

> Speculative real estate investment is a direct result of restrictive zoning.

By definition, it's not. It's a term coined to separate out the impact on prices of people buying-to-live vs people buying-to-sell/rent-and-profit. And if foreigners are more likely to buy for speculative purposes, barring them from doing so will decrease speculative increases in house prices.

Right, but things with fixed supply make perfect investment vehicles, and when people investment in real estate that is speculation.

Imagine if the stocks of public companies were not fixed in supply. The company at any time could simply decide to have shares for 200%, 300%, or 1000% without compensating existing shareholders in any way. If that was the case, stocks would be total garbage as an investment. Prices would plummet to 0.

The reason metro real estate is so attractive as an investment is because supply is inelastic. If we want to encourage usage, as oppose to hoarding, we should do like we do with fiat currencies and allow more of it to be made.

Banning foreigners might have some tiny effect, but honestly seems a bit like arranging deck chairs on the Titanic. We can check in after a year, but all my money is on Auckland continuing to have an expensive housing market (unless they allow more rezoning). Further, banning foreigners of course is also banning a valuable export and will cut off a stream of foreign money that was previously flowing into the local economy.

> when people investment in real estate that is speculation.

Investing in real estate would be purchasing property for its income earning potential.

Speculating would be purchasing for capital gains potential.

You might argue that people do both at once but if you would only make the purchase if there is a potential for capital gains and not otherwise, then you are speculating.

Investment and speculation are not different things, all investment is speculation.

From the definition of financial speculation cited elsewhere in Merriam-Webster:

> Speculation is a method of short-term investing whereby traders essentially bet on the direction an asset's price will move.

This is what most people would assume speculation to mean in the context of this discussion. It is quite normal to compare this type of speculative investment with other - especially productive - investment.

I'm very well aware of what he means, that's obvious from my response, one can be clear without misusing words and it's entirely appropriate to correct someone who's using those words wrong as if they're unrelated when they're actually both a type of investing. Try understating what's going on before you start quoting a dictionary.

> rent-and-profit

Rent and profit is a great investment for the general public. Thats not speculation, thats straight down investment.

Buy to sell is speculation, in the sense that it might not be representing the underlying risks. But even then its doubtful: if you think construction materials will rise 20% in the next year, buying your house to day and sitting on it is a sound investment, one that benefits the whole.

Speculator is an overused word to depict an enemy that kills itself.

> Thats not speculation, thats straight down investment.

You make no sense, all investment is speculation.

By what definition of investment?

The words are literally synonyms, see any dictionary.

I always think of investment as chasing the dividends and speculation as chasing the capital gains. Investors prioritize Sharpe's and alpha, while speculators are more interested in beta. Investors want to grow a business, while speculators want to make money from their money.

While they may have the same meaning in a general sense, and are synonyms from a distance, once you get up close, you can distinguish meaning between them.

That's just how English works. Huge and colossal are the same until you pull out the D&D sourcebook, and then it turns out that colossal is bigger than huge.

You can't chase dividends without risk, it's all speculation. You're making a distinction without a real difference. All investment involves risk, all investment is thus speculation. Not all speculation is investment, gambling is speculating but not investing. That's just how English works.

Those words are different in my mind. They can be the same in yours, if that's the way you prefer it. We are not beholden to the Academy of English to use words only in an officially sanctioned manner.

https://www.merriam-webster.com/dictionary/investment

https://www.merriam-webster.com/dictionary/speculation#legal...

First hit.

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