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Comment by inglor_cz | Hacker News Reader

We are having precisely the same convo in my family, in the Czech republic.

My wife is from Prague. A gem of a city, but unaffordable. Too much speculative capital from Russia, China etc. Being a slave of a mortgage until 70 is a ghastly prospect.

I am from Ostrava, a post-industrial city where property prices are about a third of Prague level. Incomes are lower, but not that much lower. For an accountant (my wife is), the difference is about 10 per cent. Overall, much easier to sustain middle class life standard.

She does not like the idea of leaving her native city, but if we manage to have a child (still a very open question), we will have to, at least for a few years.

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If you can rent significantly cheaper than total cost of servicing loans etc, consider investing the difference in index funds and rent as cheap as you can.

It might be a good bet, especially if speculation in housing is slowing down compared to the last 20-30 years.

It's possible the problem isn't speculation, but the rate of return on capital vs the rate of return on labor.

If capital dominates, you're going to run into scenarios where it's fundamentally impossible to ever afford scarce goods that generate returns, because someone who started with more capital will now have an even larger delta with you, and is therefore able to outbid you.

Well said. Another way of looking at it: in the long term return on investment (r) > economic growth (g) because “everyone” gets g but people with capital also get r.

Indeed, and credit where credit is due: https://en.m.wikipedia.org/wiki/Capital_in_the_Twenty-First_...

I don't ascribe to everything, but it's a thought provoking perspective.

Piketty has many of his class materials on his personal website as well.

Not all capital generates the same returns. Index funds have virtually no gatekeeper—you can open a brokerage account, toss in $10, and be an honest-to-god capitalist. And stocks tend to outperform real estate by a hefty margin. So catching up is possible.

Unfortunately, you need somewhere to live while you're catching up.

How much of salary - CoL can an average person dedicate to building capital?

I'm not saying it's hopeless, only that there are systemic factors fighting against home ownership in extremely supply-limited cities.

"Extremely supply-limited cities" could just mean outliers like NYC or SF, or it could mean literally every city in the country, depending on your definition. And by definition, isn't it impossible to have an extremely supply-limited city with very little barrier to home ownership?

Historically, equity markets and housing provide similar returns when you factor in rent according to this super interesting harvard paper on "The Rate of Return on Everything, 1870–2015" and the corresponding HN discussion [0]. Far less liquid and actually more stable though according to the paper.

[0]: https://news.ycombinator.com/item?id=19817584

I would think the stability is in part due to its illiquidity. If the market drops 10% and you've "heard" it's going to drop another 40%, you might dump everything. If you don't get back in at the right time you can lose even more than if you had just stayed in throughout the drop.

It's rare for folks to immediately dump their investment properties because the housing market has cooled off.

I honestly don't think "tossing in 10$ to an index fund", i.e literally pocket change, makes anyone a /capitalist/. This is not an argument in good faith relative to the reality of capitalism we live in.

It was in good faith, I promise. I think there are multiple definitions of capitalist that are broadly used. I meant it in the “investor in a business” sense. Also, it may be important to reiterate: the idea isn’t to just invest $10 and be good to go. It was just meant to highlight the low barrier to entry, which is very different from buying a home.

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