We've had more demand than supply since WW2. Which follows that price will be as high as the people can afford at a maximum. And with "people", I mean not the general people. If supply is low, you only need a small subset of people to be able to afford a house.
I want to stress how the supply/demand dynamic is leading, and how a lot of well intended policy has a counter productive effect.
For example, when we bought a house 20 years again, there was whopping 8% "transfer tax". That's tends of thousands of EUR in pure tax. The government figured that it would make housing more affordable by reducing this tax to 2%, and sometimes 0. The market immediately seizes this extra price room.
Hmmm, another try. Old people have capital and it should be possible for them to transfer a tax free amount to their children, to aid in purchasing a house. The market immediately seizes this extra price room.
An idea not yet executed is to raise the standard mortgage period from 30 years to 40 years. I think you can guess what that will do to prices.
It's not an issue you can fix with a tax tweak. You can't even fix it with the nuclear option of drastically increasing interest rates. I repeat: If supply is low, you only need a small subset of people to be able to afford a house. You can raise it to 10%, it doesn't matter.
Increasing supply is very difficult and no permanent solution in already dense areas, which is why I believe managing demand is the answer. We should stop organizing society around these "black hole" cores of very crowded countries or cities.
We've had more demand than supply since WW2. Which follows that price will be as high as the people can afford at a maximum. And with "people", I mean not the general people. If supply is low, you only need a small subset of people to be able to afford a house.
I want to stress how the supply/demand dynamic is leading, and how a lot of well intended policy has a counter productive effect.
For example, when we bought a house 20 years again, there was whopping 8% "transfer tax". That's tends of thousands of EUR in pure tax. The government figured that it would make housing more affordable by reducing this tax to 2%, and sometimes 0. The market immediately seizes this extra price room.
Hmmm, another try. Old people have capital and it should be possible for them to transfer a tax free amount to their children, to aid in purchasing a house. The market immediately seizes this extra price room.
An idea not yet executed is to raise the standard mortgage period from 30 years to 40 years. I think you can guess what that will do to prices.
It's not an issue you can fix with a tax tweak. You can't even fix it with the nuclear option of drastically increasing interest rates. I repeat: If supply is low, you only need a small subset of people to be able to afford a house. You can raise it to 10%, it doesn't matter.
Increasing supply is very difficult and no permanent solution in already dense areas, which is why I believe managing demand is the answer. We should stop organizing society around these "black hole" cores of very crowded countries or cities.