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Comment by ggm | Hacker News Reader

"good" is relative. the longterm rate of return on investment is 7% so a stable property portfolio returning 5% or less reliably can counter-balance higher risk exposure above 15%

remember that the rate of return in property investment has two components: the rent, offsets against tax for the maintenance of costs, and the capital gain. the show isn't over until the deal is done and like gambling you have to know when to hold 'em and know when to fold them into somebody else's property portfolio.

also, social housing is "good" for reasons which can go to longer term investment outcome. What if holding cheap housing stock in your portfolio also prevents competition setting up closer to your other valuable investment?

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From the position of affordability housing should not appreciate faster than the income profile of the population. Since median income increased minimally (inflation adjusted) in the past 50 years one would expect that "affordable" housing should not increase beyond the rate of inflation. As such, 5% is far greater appreciation rate than what is sustainable (2-3% being more in line with income).

Yes. So rent had to be regulated and controlled. The ROI is across rent as income and capital gain. Capital gain would make up a lot of the long-term ROI of owning property. Even cooperative housing and co-owner models have to recognize this.

A lot of people buy housing with the idea that the house they live in is somehow an investment. This is also what was discussed in the article. Long term, this is not sustainable. If you rent out property, then it makes sense you can make more than inflation, but if you live in the house, you should have the same ROI as income growth in your area.

Yes. I think believing your home is an investment beyond providing your home is a huge mistake. But, its a common huge mistake.

The point I was trying to head to, is that rent doesn't have to rise, simply because people think rental investment has to return some arbitrary ROI for the capital invested in it. Lots of forms of investment exist, some of which return less than others, and we have a mix of investments for a mix of reasons.

In Brisbane (where I live, and co-own a house I live in which I do not regard as an investment in that sense), rents fell last year due to oversupply. Prices fell too, but the two were somewhat de-coupled. Supply of affordable housing fell too. Some people think there is a nexus, I think the fall in affordable housing is down to lack of rent controls, long term tenancies, and state and federal convergeance on housing policy.

Anything that appreciates at 5% per year is not going to be affordable.

Well, not for very long.

If housing prices outpace wage growth than either housing costs will become a larger and larger portion of people's budget or housing quality will continue to become poorer and poorer.

(Unlikely third option: Wages begin to represent a smaller portion of total income)

5% annual return is significantly higher than wage growth.

Yes. I'm well paid but have been held to CPI for years. I absolutely agree that an ongoing rental price rise has been hugely toxic to affordable housing.

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