Same thing happens in Poland. There are only 4-5 rather small cities with good jobs + shitload of skilled and unskilled Ukrainian immigrants (like really, there are days when I walk through town and 80% people I pass by speak Ukrainian) + Airbnb craziness + no regulations + shitty politicians = it became impossible to rent or buy even small apartment if you are not highly skilled or not willing to share room with someone you don't know. It all happend in last 4-5 years. I was born in one of these towns (Krakow) and it just hurts me to see huge division in society, clearly there are lots of rich people that are getting richer every month, buying multiple houses and renting, and there are shitload of (some of them university educated) people living in tiny old Soviet era apartments (imagine whole family and dog in 400-450sqft). Actually many people don't even dream about own place. Both my parents and my grandparents were able to buy apartment without having any sort of education, today if I wasn't Software Dev I would be homeless. We are talking Poland here, can't imagine how much worse it must be in other actually real countries.
I worked on a project here in Norway, and I'd say that about 60%-70% of all construction worker on active projects here are Polish workers. Everyone said that buying an apartment or house is just too expensive on Polish salaries, but doable on the salaries they were making here.
The Poles here are extremely aggressive when it comes to work. They will gladly work 7 days a week, 12 hour days, if they get the chance. And many will share apartments with 3-5 other guys, to minimize living costs.
What else they can do in a depressing dark cold exorbitantly expensive place? Such foreigner is quite literally feeling paralyzed. Use all available time to exchange it for money. Any place to stay they get will be an overcrowded shithole anyway, which is yet another motivation to stay in work.
Meanwhile young Scandinavians flood Polish coastal cities for binges with cheap and freely available alcohol, and staying at airbnb at prices ridiculous for Polish salaries.
We build your stuff, you cover our streets with vomit. Yet you still feel superior.
Edit: it looks like you've been crossing into this repeatedly in HN comments. We ban accounts that do that. I don't want to ban you, so please stop doing that.
This is insecure thinking of a post-Communist person gasping at those born with wealth and at those who never really made an effort to earn even a fraction of their wealth. Had two our preceding generations think this way, Nazis would never lost, Communism would never fall. You will never earn their respect, Ionuç.
Even in Warsaw, where there are many building projects, the prices are very high. As a dev I had to save for a bunch of years to afford it.
(Calculated it to be more efficient and safer in terms of risk than mortgage.)
Sellers indeed noticed that the prices exceeded what most can pay, even in Greater Warsaw.
Krakow is the second or third most populous city in Poland. However, the population of the whole metropolitan area is ca 1.3 Million. [1] or 1.7 Million [2]
At the larger estimate, that's about as big as Oxford or Slough, smaller than Swindon. At the smaller, High Wycombe or Grimsby [3], none of which would appear on a list of Big British Cities.
It's about 38 in the list of EU Larger Urban Zones [4]. Seven German cities appear higher in that list.
There is a housing problem in Berlin now, because there are a lot of tech workers are immigrating from India, Turkey, Russia and many other countries for work and the rents are over the roof.
I am not sure about Berlin, but for example in Milan (Italy) there are nonsensic prices for homes (London level prices with salaries of about half of the half of what you get in London) and they are driven up just by the movement of other italians from other (poorer) regions, or even other close cities, looking for jobs.
The main problem is that most high level - high skilled jobs are now in 2-3 of the biggest cities in Italy, and now everyone is trying to move there and so even more companies try to move their HQs there, and so on. I think a similar problem is happening also in others EU states.
Italian economy is so miserable and few opportunity hubs so competitive that most Italians in their 20s and 30s end up in Germany and UK. Meantime rich Europeans visit Italy each summer searching for dolce vita and forgetting that 60s and 70s are long time gone. What an absurd.
The amount of tech workers migrating is minuscule compared to the number of unskilled migration coming from countries like Syria and Afghanistan to Berlin. That is where the demand shock on the housing market comes from.
You're both right. Correcting OP, desperate tech workers accepting being lowballed, hopping between temporary apartments each couple of months, being replaced in 2 years by someone even more desperate, hoping to get their feet in the door (into a place with minuscle payrises and impossible housing market). Ideal candidate is someone from outside of EU (or an EU country but troubled with decades of economic crisis) with a spouse and a child. Have fun you all, because I'm out of this freak place!
> number of unskilled migration coming from countries like Syria and Afghanistan to Berlin
These people cluser in the city districts ruled by Middle Eastern organized crime (if you ask Germans, no such phenomenon exists). There, market forces don't apply and housing market is hermetic to the outsiders - and it doesn't matter because you wouldn't want to live there.
I kind of disagree with this view over salaries. There’s a lot of rules to bring a skilled worker from outside of EU. One in particular deals with how low can your salary be, which if I remember correctly is around 45~50k. The main problem I see is with poor countries inside EU. I remember a Portuguese girl in my previous company with similar role and experience making 30k a year, she left when while complaining about salary they said they could offer a 10% raise which would be an amazing raise for her. Same situation on the current company, this time with a Hungarian guy.
45-50k is not enough to make a good living in Berlin, when your rent and utilities (everything included) is around 1k to 1,250 EUR, which leaves you around 1k EUR to live by.
Is that a joke? With €45k+ in Berlin you have a pretty decent way of living, that’s higher than any median or average. And you can have good rent if you don’t live in trendy areas where prices are inflated.
> With €45k+ in Berlin you have a pretty decent way of living
Then cancel you rental contract, rent something new again and now... if not homeless (or stuck with airbnb)... re-estimate what the decent salary would be.
I’m in the process of moving right now (literally in a week), I’m quite aware of rent prices. Maybe we have a different definition of “decent” in this context.
So what when that’s higher than any median and average? It’a enough money to survive in today’s Berlin, but it’s far far away from anything decent! Started almost decade ago with these €45k in Lindau, 800€ rent, 400€ unavoidable expenses. Add some savings and an upkeep costs of a 7 years old car and it’s gone.
I'm in a US Rust Belt city that's lost population since the 1950s, and had flat growth in the region since 1970.
Yet in many neighborhoods housing prices have doubled to quintupled over the past 15 years.
Similar stories in a lot of other rust belt areas which I know are not booming. The urban areas are definitely more attractive than they used to be, but it doesn't add up. It makes me think the drive behind this is post-financial crisis monetary policy.
The only city I am aware of with rent control in Europe is Stockholm. Apparently finding a flat there is a nightmare. Where I live there is no rent control and its still a nightmare trying to find somewhere central to rent for a decent price.
There is all kinds of rent control over all Europe. In Stockholm is a nightmare. I tell you, 20 years to get a flat. There are other forms of rent control, that affects more or less. The economist Juan Ramon Rallo studied this matter deeply and he states that the only solution is deregulate construction (more buildings, higher) and no rent control, so tenants can rent cheaply without so much requirements to get into a flat.
Ok, its true, there is some sort of rent control where I live, the inflation can only go up by the same as inflation - for the duration of the contract. But then one the contract is up they can charge what the market will let them. Contracts were 5 years, went down to 3, and are now back up to 5.
At the end of our last 5 year contract the rent went up by around 45%. Bought a small place further out instead.
I live in such a city here in Norway. There are many reasons, but here are some:
- Decades long centralizing policies, which have effectively removed gov / state jobs from more rural areas and districts, and centralized them to a select few larger towns. Lots of smaller towns and areas are dying, while everyone's emigrating to the same cities.
- Explosion on college education. Our local University has a 10%-15% growth rate, every year. Students in turn need to live somewhere, and there aren't being built nearly enough student housing / dorms.
- More tourism; We've had a boom in tourism, especially among Asian tourists. This has lead to expansions of hotels, and more people renting out their apartments etc. to airbnb
- Other economic growth in private industries, which means more workers
- Construction workers that need places to stay - we have thousands of construction workers coming here every year, none of them which own - or plan to own - housing themselves.
When I moved here, rent was around $400 for a small studio apartment. 10 years later, the same studio apartment is rented out for $1200...it's grotesque.
The lucky people are either those who's owned units since the 80s, or those that bought right after the last recession. I know so many people that have made hundreds of thousands, just because they bought at the right time - no renovations needed.
Edit: Just to give an example; In the city where I now live, a decent house will cost you around $600k-$700k. A "starter" apartment will cost you minimum $180k-$200k.
If you drive 1 hour away, the prices will be cut in half. If you move 1-2 hr flight time away, you'll probably pay 20% of those prices. And we have 15% down-payment here in Norway! Lots of young people will spend a solid 3-5 years just saving up for the down-payment.
One "life-hack" among fresh grads is to simply move somewhere rural if you can get a relevant job, save aggressively for a couple of years, and then move back to the city.
Correct me if I'm wrong, but this methodology seems flawed. Using building permits per 1000 residents only provides an accurate comparison metric if the density of the housing is the same.
If the move is (as it seems to be) towards large multi-unit housing complexes, shouldn't we be looking at residential units created?
Yes it's interesting that the SF area has such high demand for technology workers yet almost no space to actually house them (let alone all the down-and-out people living in parks & alleyways).
Sounds like kind of a disconnect between the business community and the government as well as the geographic realities of a city crowded onto a little peninsula, albeit of course with many suburban towns nearby but very heavily developed already.
I couldn't imagine being lured to the bay area for a job even for double my current salary (standard software engineer very low 6 figs). I have maybe $210K of equity in my current home; how much of a house is that going to get me there? I'd never afford a million dollar mortgage. Would have to be full time remote.
In California, the picture is incomplete unless you include the effects of proposition 13. It has been in effect since 1978 and strongly encourages municipalities to prioritize commercial real estate over residential. Commercial real estate provides a tax base that can be increased over time with the value of the property, and does not represent as large of an infrastructure investment (residential requires schools and so on).
It isn't only prop 13 that is to blame for the bay areas particular housing crisis, but encouraging towns to not approve residential starts cannot help.
Only a few jobs can be made remote. Do you have a remote shop clerk? Remote salesman? Remote janitor?
Remote gardener? Remote garbage collector?
The growth in jobs is not necessarily in the skilled ones.
And those are definitely not the jobs poorer people who cannot afford to rent or own do.
And there is very strong opposition to going fully remote. When you have to be in office even once a week or every two weeks, you need a temporary place still...
>Never seems to occur to anyone that crazy high salaries might be driving crazy high housing prices
It's the only logical conclusion. Married couples, each making well over $100k, competing with each other will obviously result in higher home prices, unless you increase the supply of the homes that those married couples desire. If you look at a map of recent home sale prices on Redfin or the real estate websites, you can easily see where all the doctors/programmers/business owners live in a town.
Well if business owners are included by definition salary isn't to blame.
Really it is demand/supply with a ceiling limited by ability to pay and ability to add new stock that rougly determines the limit.
If the current supply is one remaing for sale house for $5 million when with a per house and land cost of at most $350k but anyone willing to wait could get new land and build it in a year for $500k there won't be any takers unless that are in a major hurry.
Yes, the supply curve of course plays an equally important role. However, I have read some claims that the high house prices cause the high salaries, which is ludicrous to me. In order for prices to be high, the buyers must be able to afford it and willing to pay it (the demand curve).
There probably is some feedback curve. The higher housing prices do raise labor even of "commodity" low end jobs but there is an important third variable without salary and housing would both collapse - does the employer get anything out of the expensive location which justifies setting up there instead of some place cheaper?
That something can take many forms from access to customers, the "prestige" of an area being an effective requisite where those who don't pay the expense are judged as second tier regardless if it is true or not, or simply that the location is a literal prerequisite like minerals in the area for an extractive industry. Let any relevant to the instance specific quality or quantity over others be termed "edge" as it is about relative difference mostly.
For a concrete example it would be Lewis Carrollian madness to set up a gold mine the next town over without any precious metals because the no matter how much the land and wages are cheaper for the mine towns have the infinite edge for gold mining over one with literally none.
Establishing a mine in the third world with lesser deposits to get half of the gold per mine for a tenth of the wage and real estate costs would still win in spite of the weaker gold veins.
In thie case locally biggest threat to wages and housing price value other than literal anhilation would be the loss of an edge to justify it. The edge in this case is fuzzier, partially the prestige and partially the talent of "performers" measured in outcomes. Those are also in somewhat circular feedback loops. The prestige attracts the performers and the success of the performers maintains the prestiege. A slip in performance will cause eventual collapse of prestige if they fail to justify their expense. Damage to prestige may limit income of new talent or lead to an exodus.
It’s never one thing. Also consider crazy low interest rates and lax borrowing controls making it easy to borrow large amounts of money. This makes it easy to invest/fund companies, easy to pay more to your employees and easier for the employees to borrow more or pay higher rents.
It’s a feedback loop. Prices in the Valley weren’t always crazy high, they were just higher than normal for many decades. Then Valley tech companies started getting in a pissing contest with each other to get “the best talent”, driving salaries higher and higher, thus attracting more people, driving housing prices up. Companies continue driving salaries up to convince people that they could afford to live and work there. And on and on...
I'm not sure conspiracy theories are sound economic analysis.
How about, population rose but land area stayed the same. All the land got developed (it used to be orchards, remember?) so the only way to get more land for housing was, to pay more for existing plots. So the prices go up.
No need to imagine a class of evil plotters, trying to make everyone sad.
I ask the honourable HN readers, how much are you into all that real estate talks? I feel that second to computer stuff, the biggest interest of the tech people is property market.
Is it such a big concern even for so highly paid people?
It is for me. I work as a research engineer at a non-FAANG company in Silicon Valley and I have 4.5 years of industry experience largely in R&D environments. If I were in the Sacramento metro area then I could afford to purchase a detached single-family home in all but the most expensive neighborhoods. I would have a wide selection of safe neighborhoods to choose from with excellent public schools, beautiful parks, and other amenities.
Unfortunately, in the Bay Area my options for purchasing a detached single-family house are limited. At my current salary, if I want to purchase a detached single-family home, I'd either need to buy it in exurbia (e.g., places like Tracy to the east or Hollister to the south) or in East Oakland, which is still struggling with crime. Both places are a long commute from my Silicon Valley office. If I want to purchase a place within an hour from my job such as the southern part of San Jose, I'd need a considerable salary boost. Places like Cupertino and Sunnyvale seem impossibly expensive to me.
I've been thinking a lot about where I'd like to settle down. Silicon Valley has a wealth of specialized research scientist and research engineer positions, but I don't see myself ever being able to afford a house within an hour from Silicon Valley unless I join an early-stage startup that happens to be a wild success. On the flip side, there are plenty of places across the country, even within California, where homes are affordable with a low six-figure salary, but the problem is the types of jobs that I want tend to be restricted to tech hubs, which tend to have very high housing costs.
My goal (set by a different culture of origin, with much less space available than in the US) is an apartment that I own, with enough indoor space for a family. The American obsession with "detached" doesn't resonate with me, and may not serve you well if you're living in this expensive of a housing market.
> Is it such a big concern even for so highly paid people?
Yes.
I get paid handsomely for my country and the actual experience I have. However, despite that, it's impossible for me to buy a house within 45 minutes travelling of my workplace, so I'm forced to spend about half my net incoming on rent.
I now pay more for a room in a five person shared house then i paid for a 3 bed house to myself. The only difference is being located closer to London for the better career advancement/salary.
It's a huge concern if you're living in the "western world", especially in a big city, which is where jobs tend to congregate. London is a nightmare for this, for example.
It's the exact reason why many tech people are clamoring for remote work and going for "vacations" to Asian holiday countries (Thailand is a big one) where they stay most of the year. It's literally cheaper to live in a tropical paradise than in a reasonable apartment in London.
I've also seen a trend where companies start their offices in smaller cities next to capitals and their employees don't commute TO work, they commute from their homes to bigger cities on weekends. It's still decidedly far from ideal but it beats spending 1.5 hours on a commute every single day.
Tech jobs, especially the type held by HN readers tend to be clustered together in expensive real estate markets so naturally it would be a top issue in the minds of most here. Even for someone like myself who works remotely from the north Georgia mountains and has no problem affording a large home with acreage, the housing woes of tech hubs is a concern because it becomes a public policy issue that can have impacts beyond the expensive areas they're meant to address.
Not just with each other but if landlords and real estate companies far more wealthier then us, which inflate the demand to a level that doesn’t make any sense. That’s why even earning a top 5% salary you still can’t afford a home close to city centers.
I don't really see how I'm competing with real estate companies and landlords, though. How exactly do they inflate demand for housing?
I mean, if there's 5 properties for rent instead of sale in the example I gave you still have the same core problem.
If 100 people need homes and you only have 50, then the people with the most money they can/want to spend on housing will get it.
It's attenuated by the willingness of people to have roommates, move in with family (if around) etc. so there can be more latent demand than is immediately present. Even if you have no homeless but a whole city is 4 rich tech workers per 3 bed apartment, there's still plenty of demand.
They don't inflate demand, they inflate pricing. To buy a house you are competing with all the peope + all the companies that see it as an investment opportunity.
Because access to real estate affects your access to high income jobs. These people are highly paid precisely because they pay attention to real estate.
It's easy. Its the same in all major cities in Europe. Entertainment is almost free, healthy food is cheap, medical care is mostly free, education is free, sports are cheap, traveling is super cheap. Everyone puts all of their money in real estate, supply is extremely restricted, demand is bigger every month, prices skyrocket.
at the moment Its big for me, because I'm right now looking to buy a new place to move to for better school options for the kids and a shorter commute for me.
Same thing happens in Poland. There are only 4-5 rather small cities with good jobs + shitload of skilled and unskilled Ukrainian immigrants (like really, there are days when I walk through town and 80% people I pass by speak Ukrainian) + Airbnb craziness + no regulations + shitty politicians = it became impossible to rent or buy even small apartment if you are not highly skilled or not willing to share room with someone you don't know. It all happend in last 4-5 years. I was born in one of these towns (Krakow) and it just hurts me to see huge division in society, clearly there are lots of rich people that are getting richer every month, buying multiple houses and renting, and there are shitload of (some of them university educated) people living in tiny old Soviet era apartments (imagine whole family and dog in 400-450sqft). Actually many people don't even dream about own place. Both my parents and my grandparents were able to buy apartment without having any sort of education, today if I wasn't Software Dev I would be homeless. We are talking Poland here, can't imagine how much worse it must be in other actually real countries.
I worked on a project here in Norway, and I'd say that about 60%-70% of all construction worker on active projects here are Polish workers. Everyone said that buying an apartment or house is just too expensive on Polish salaries, but doable on the salaries they were making here.
The Poles here are extremely aggressive when it comes to work. They will gladly work 7 days a week, 12 hour days, if they get the chance. And many will share apartments with 3-5 other guys, to minimize living costs.
What else they can do in a depressing dark cold exorbitantly expensive place? Such foreigner is quite literally feeling paralyzed. Use all available time to exchange it for money. Any place to stay they get will be an overcrowded shithole anyway, which is yet another motivation to stay in work.
Meanwhile young Scandinavians flood Polish coastal cities for binges with cheap and freely available alcohol, and staying at airbnb at prices ridiculous for Polish salaries.
We build your stuff, you cover our streets with vomit. Yet you still feel superior.
Nationalistic flamewar isn't allowed on HN, so please don't post like this here.
https://news.ycombinator.com/newsguidelines.html
Edit: it looks like you've been crossing into this repeatedly in HN comments. We ban accounts that do that. I don't want to ban you, so please stop doing that.
> Yet you still feel superior.
$$$.
I'm Romanian so I'm kind of in the same boat regarding your situation. Might makes right. Make more money and prove them wrong.
Well, money's just a summary: get a better education, better living conditions, etc. Money well spent earns you respect.
This is insecure thinking of a post-Communist person gasping at those born with wealth and at those who never really made an effort to earn even a fraction of their wealth. Had two our preceding generations think this way, Nazis would never lost, Communism would never fall. You will never earn their respect, Ionuç.
Even in Warsaw, where there are many building projects, the prices are very high. As a dev I had to save for a bunch of years to afford it. (Calculated it to be more efficient and safer in terms of risk than mortgage.)
Sellers indeed noticed that the prices exceeded what most can pay, even in Greater Warsaw.
Just curious: are the UK immigrants knowledgeable/fluent in Polish? Or do they just work in English? Or just Ukrainian and get any job to get by?
The abbreviation for Ukraine is UA.
Krakow is small? I think it is one of largest cities in Poland
Krakow is the second or third most populous city in Poland. However, the population of the whole metropolitan area is ca 1.3 Million. [1] or 1.7 Million [2]
At the larger estimate, that's about as big as Oxford or Slough, smaller than Swindon. At the smaller, High Wycombe or Grimsby [3], none of which would appear on a list of Big British Cities.
It's about 38 in the list of EU Larger Urban Zones [4]. Seven German cities appear higher in that list.
[1] https://en.wikipedia.org/wiki/Larger_urban_zone [2] https://en.wikipedia.org/wiki/Krak%C3%B3w [3] https://en.wikipedia.org/wiki/List_of_urban_areas_in_the_Uni... [4] https://en.wikipedia.org/wiki/Larger_urban_zone
> At the larger estimate, that's about as big as Oxford or Slough, smaller than Swindon.
Wikipedia says even the Oxford metro area is only 244,000 people vs about 700k people for Krakow city alone.
You're right. I can't work out what I misread to get that statement. It's not as if I could have just misplaced a multiple of 10. It's just wrong.
There is a housing problem in Berlin now, because there are a lot of tech workers are immigrating from India, Turkey, Russia and many other countries for work and the rents are over the roof.
I am not sure about Berlin, but for example in Milan (Italy) there are nonsensic prices for homes (London level prices with salaries of about half of the half of what you get in London) and they are driven up just by the movement of other italians from other (poorer) regions, or even other close cities, looking for jobs.
The main problem is that most high level - high skilled jobs are now in 2-3 of the biggest cities in Italy, and now everyone is trying to move there and so even more companies try to move their HQs there, and so on. I think a similar problem is happening also in others EU states.
Italian economy is so miserable and few opportunity hubs so competitive that most Italians in their 20s and 30s end up in Germany and UK. Meantime rich Europeans visit Italy each summer searching for dolce vita and forgetting that 60s and 70s are long time gone. What an absurd.
I uh don't think the 70s were the nicest time to visit Italy https://en.wikipedia.org/wiki/Years_of_Lead_(Italy)
Yeah, and I don't think it will stop anytime soon.. Some (myself included) call it the second industrialization.
The amount of tech workers migrating is minuscule compared to the number of unskilled migration coming from countries like Syria and Afghanistan to Berlin. That is where the demand shock on the housing market comes from.
You're both right. Correcting OP, desperate tech workers accepting being lowballed, hopping between temporary apartments each couple of months, being replaced in 2 years by someone even more desperate, hoping to get their feet in the door (into a place with minuscle payrises and impossible housing market). Ideal candidate is someone from outside of EU (or an EU country but troubled with decades of economic crisis) with a spouse and a child. Have fun you all, because I'm out of this freak place!
> number of unskilled migration coming from countries like Syria and Afghanistan to Berlin
These people cluser in the city districts ruled by Middle Eastern organized crime (if you ask Germans, no such phenomenon exists). There, market forces don't apply and housing market is hermetic to the outsiders - and it doesn't matter because you wouldn't want to live there.
I kind of disagree with this view over salaries. There’s a lot of rules to bring a skilled worker from outside of EU. One in particular deals with how low can your salary be, which if I remember correctly is around 45~50k. The main problem I see is with poor countries inside EU. I remember a Portuguese girl in my previous company with similar role and experience making 30k a year, she left when while complaining about salary they said they could offer a 10% raise which would be an amazing raise for her. Same situation on the current company, this time with a Hungarian guy.
45-50k is not enough to make a good living in Berlin, when your rent and utilities (everything included) is around 1k to 1,250 EUR, which leaves you around 1k EUR to live by.
Is that a joke? With €45k+ in Berlin you have a pretty decent way of living, that’s higher than any median or average. And you can have good rent if you don’t live in trendy areas where prices are inflated.
> With €45k+ in Berlin you have a pretty decent way of living
Then cancel you rental contract, rent something new again and now... if not homeless (or stuck with airbnb)... re-estimate what the decent salary would be.
I’m in the process of moving right now (literally in a week), I’m quite aware of rent prices. Maybe we have a different definition of “decent” in this context.
So what when that’s higher than any median and average? It’a enough money to survive in today’s Berlin, but it’s far far away from anything decent! Started almost decade ago with these €45k in Lindau, 800€ rent, 400€ unavoidable expenses. Add some savings and an upkeep costs of a 7 years old car and it’s gone.
>7 years old car
Mr. Big Shot
It is happening all around Europe.
Rent control + increasing wealth of the economy is crowding areas and limiting to bid for new renting spaces.
It's happening all around the world.
I'm in a US Rust Belt city that's lost population since the 1950s, and had flat growth in the region since 1970.
Yet in many neighborhoods housing prices have doubled to quintupled over the past 15 years.
Similar stories in a lot of other rust belt areas which I know are not booming. The urban areas are definitely more attractive than they used to be, but it doesn't add up. It makes me think the drive behind this is post-financial crisis monetary policy.
Yep, borrowing is cheap and real estate returns are regular. They outpace inflation, and many other places you can put your money, do not.
Fortunately, not in Singapore. Our rents have come down in the last few years.
(Still at a very high absolute level.)
Are places with rent control better or worse?
The only city I am aware of with rent control in Europe is Stockholm. Apparently finding a flat there is a nightmare. Where I live there is no rent control and its still a nightmare trying to find somewhere central to rent for a decent price.
There is all kinds of rent control over all Europe. In Stockholm is a nightmare. I tell you, 20 years to get a flat. There are other forms of rent control, that affects more or less. The economist Juan Ramon Rallo studied this matter deeply and he states that the only solution is deregulate construction (more buildings, higher) and no rent control, so tenants can rent cheaply without so much requirements to get into a flat.
Ok, its true, there is some sort of rent control where I live, the inflation can only go up by the same as inflation - for the duration of the contract. But then one the contract is up they can charge what the market will let them. Contracts were 5 years, went down to 3, and are now back up to 5.
At the end of our last 5 year contract the rent went up by around 45%. Bought a small place further out instead.
Playing the devils advocate, it's not 20 years to get a flat. It's 20 years to get a large, cheap, centrally located flat.
You can get a firsthand contract for spatious 2 room apartment in Märsta for 14k a month right now.
Yes, we're talking about big cities. People want to live near the center, but even at 14km is not matter of days. You need to wait.
It's everywhere in Europe, not just Berlin.
Some cities in Portugal have more than doubled the rents in the last 4 years.
I live in such a city here in Norway. There are many reasons, but here are some:
- Decades long centralizing policies, which have effectively removed gov / state jobs from more rural areas and districts, and centralized them to a select few larger towns. Lots of smaller towns and areas are dying, while everyone's emigrating to the same cities.
- Explosion on college education. Our local University has a 10%-15% growth rate, every year. Students in turn need to live somewhere, and there aren't being built nearly enough student housing / dorms.
- More tourism; We've had a boom in tourism, especially among Asian tourists. This has lead to expansions of hotels, and more people renting out their apartments etc. to airbnb
- Other economic growth in private industries, which means more workers
- Construction workers that need places to stay - we have thousands of construction workers coming here every year, none of them which own - or plan to own - housing themselves.
When I moved here, rent was around $400 for a small studio apartment. 10 years later, the same studio apartment is rented out for $1200...it's grotesque.
The lucky people are either those who's owned units since the 80s, or those that bought right after the last recession. I know so many people that have made hundreds of thousands, just because they bought at the right time - no renovations needed.
Edit: Just to give an example; In the city where I now live, a decent house will cost you around $600k-$700k. A "starter" apartment will cost you minimum $180k-$200k.
If you drive 1 hour away, the prices will be cut in half. If you move 1-2 hr flight time away, you'll probably pay 20% of those prices. And we have 15% down-payment here in Norway! Lots of young people will spend a solid 3-5 years just saving up for the down-payment.
One "life-hack" among fresh grads is to simply move somewhere rural if you can get a relevant job, save aggressively for a couple of years, and then move back to the city.
Correct me if I'm wrong, but this methodology seems flawed. Using building permits per 1000 residents only provides an accurate comparison metric if the density of the housing is the same.
If the move is (as it seems to be) towards large multi-unit housing complexes, shouldn't we be looking at residential units created?
Based on title alone, sounds like cities where remote work is going to play a prominent role.
Yes it's interesting that the SF area has such high demand for technology workers yet almost no space to actually house them (let alone all the down-and-out people living in parks & alleyways).
Sounds like kind of a disconnect between the business community and the government as well as the geographic realities of a city crowded onto a little peninsula, albeit of course with many suburban towns nearby but very heavily developed already.
I couldn't imagine being lured to the bay area for a job even for double my current salary (standard software engineer very low 6 figs). I have maybe $210K of equity in my current home; how much of a house is that going to get me there? I'd never afford a million dollar mortgage. Would have to be full time remote.
In California, the picture is incomplete unless you include the effects of proposition 13. It has been in effect since 1978 and strongly encourages municipalities to prioritize commercial real estate over residential. Commercial real estate provides a tax base that can be increased over time with the value of the property, and does not represent as large of an infrastructure investment (residential requires schools and so on).
It isn't only prop 13 that is to blame for the bay areas particular housing crisis, but encouraging towns to not approve residential starts cannot help.
> Commercial real estate provides a tax base that can be increased over time with the value of the property,
This isn't true. Prop 13 applies to commercial property also. There is a growing movement to repeal that aspect of it in 2020.
Only a few jobs can be made remote. Do you have a remote shop clerk? Remote salesman? Remote janitor? Remote gardener? Remote garbage collector?
The growth in jobs is not necessarily in the skilled ones. And those are definitely not the jobs poorer people who cannot afford to rent or own do.
And there is very strong opposition to going fully remote. When you have to be in office even once a week or every two weeks, you need a temporary place still...
Why not? Why can some of those jobs not be remote?
> I'd never afford a million dollar mortgage.
Well if HN is to be believed, $350K of total compensation isn’t out of the ordinary for FAANG, so that would get you in a million dollar house.
Never seems to occur to anyone that crazy high salaries might be driving crazy high housing prices, not the other way around, though...
>Never seems to occur to anyone that crazy high salaries might be driving crazy high housing prices
It's the only logical conclusion. Married couples, each making well over $100k, competing with each other will obviously result in higher home prices, unless you increase the supply of the homes that those married couples desire. If you look at a map of recent home sale prices on Redfin or the real estate websites, you can easily see where all the doctors/programmers/business owners live in a town.
Well if business owners are included by definition salary isn't to blame.
Really it is demand/supply with a ceiling limited by ability to pay and ability to add new stock that rougly determines the limit.
If the current supply is one remaing for sale house for $5 million when with a per house and land cost of at most $350k but anyone willing to wait could get new land and build it in a year for $500k there won't be any takers unless that are in a major hurry.
Yes, the supply curve of course plays an equally important role. However, I have read some claims that the high house prices cause the high salaries, which is ludicrous to me. In order for prices to be high, the buyers must be able to afford it and willing to pay it (the demand curve).
There probably is some feedback curve. The higher housing prices do raise labor even of "commodity" low end jobs but there is an important third variable without salary and housing would both collapse - does the employer get anything out of the expensive location which justifies setting up there instead of some place cheaper?
That something can take many forms from access to customers, the "prestige" of an area being an effective requisite where those who don't pay the expense are judged as second tier regardless if it is true or not, or simply that the location is a literal prerequisite like minerals in the area for an extractive industry. Let any relevant to the instance specific quality or quantity over others be termed "edge" as it is about relative difference mostly.
For a concrete example it would be Lewis Carrollian madness to set up a gold mine the next town over without any precious metals because the no matter how much the land and wages are cheaper for the mine towns have the infinite edge for gold mining over one with literally none.
Establishing a mine in the third world with lesser deposits to get half of the gold per mine for a tenth of the wage and real estate costs would still win in spite of the weaker gold veins.
In thie case locally biggest threat to wages and housing price value other than literal anhilation would be the loss of an edge to justify it. The edge in this case is fuzzier, partially the prestige and partially the talent of "performers" measured in outcomes. Those are also in somewhat circular feedback loops. The prestige attracts the performers and the success of the performers maintains the prestiege. A slip in performance will cause eventual collapse of prestige if they fail to justify their expense. Damage to prestige may limit income of new talent or lead to an exodus.
It’s never one thing. Also consider crazy low interest rates and lax borrowing controls making it easy to borrow large amounts of money. This makes it easy to invest/fund companies, easy to pay more to your employees and easier for the employees to borrow more or pay higher rents.
It could also be crazy high housing prices driving crazy high salaries. Assuming people turn down offers due to differences in cost of living.
It’s a feedback loop. Prices in the Valley weren’t always crazy high, they were just higher than normal for many decades. Then Valley tech companies started getting in a pissing contest with each other to get “the best talent”, driving salaries higher and higher, thus attracting more people, driving housing prices up. Companies continue driving salaries up to convince people that they could afford to live and work there. And on and on...
I'm not sure conspiracy theories are sound economic analysis.
How about, population rose but land area stayed the same. All the land got developed (it used to be orchards, remember?) so the only way to get more land for housing was, to pay more for existing plots. So the prices go up.
No need to imagine a class of evil plotters, trying to make everyone sad.
would be great for any country whos cities can achieve this, in terms of wealth distribution etc
I ask the honourable HN readers, how much are you into all that real estate talks? I feel that second to computer stuff, the biggest interest of the tech people is property market.
Is it such a big concern even for so highly paid people?
It is for me. I work as a research engineer at a non-FAANG company in Silicon Valley and I have 4.5 years of industry experience largely in R&D environments. If I were in the Sacramento metro area then I could afford to purchase a detached single-family home in all but the most expensive neighborhoods. I would have a wide selection of safe neighborhoods to choose from with excellent public schools, beautiful parks, and other amenities.
Unfortunately, in the Bay Area my options for purchasing a detached single-family house are limited. At my current salary, if I want to purchase a detached single-family home, I'd either need to buy it in exurbia (e.g., places like Tracy to the east or Hollister to the south) or in East Oakland, which is still struggling with crime. Both places are a long commute from my Silicon Valley office. If I want to purchase a place within an hour from my job such as the southern part of San Jose, I'd need a considerable salary boost. Places like Cupertino and Sunnyvale seem impossibly expensive to me.
I've been thinking a lot about where I'd like to settle down. Silicon Valley has a wealth of specialized research scientist and research engineer positions, but I don't see myself ever being able to afford a house within an hour from Silicon Valley unless I join an early-stage startup that happens to be a wild success. On the flip side, there are plenty of places across the country, even within California, where homes are affordable with a low six-figure salary, but the problem is the types of jobs that I want tend to be restricted to tech hubs, which tend to have very high housing costs.
My goal (set by a different culture of origin, with much less space available than in the US) is an apartment that I own, with enough indoor space for a family. The American obsession with "detached" doesn't resonate with me, and may not serve you well if you're living in this expensive of a housing market.
That becomes difficult when 2 bedroom+ places are rarely built because it’s more profitable per m2 to build 1 bedroom units.
If it's unprofitable to build 2br+ apartments, it's not any easier to find 2br+ houses.
For whatever reasons (planning approvals?), 1br houses aren’t built. At least around here. But 1br apartments and condos are the bulk of the market.
That’s not to say that 2br+ apartments are unprofitable to build, just less so.
> Is it such a big concern even for so highly paid people?
Yes.
I get paid handsomely for my country and the actual experience I have. However, despite that, it's impossible for me to buy a house within 45 minutes travelling of my workplace, so I'm forced to spend about half my net incoming on rent.
Similar situation to me.
I now pay more for a room in a five person shared house then i paid for a 3 bed house to myself. The only difference is being located closer to London for the better career advancement/salary.
It's a huge concern if you're living in the "western world", especially in a big city, which is where jobs tend to congregate. London is a nightmare for this, for example.
It's the exact reason why many tech people are clamoring for remote work and going for "vacations" to Asian holiday countries (Thailand is a big one) where they stay most of the year. It's literally cheaper to live in a tropical paradise than in a reasonable apartment in London.
I've also seen a trend where companies start their offices in smaller cities next to capitals and their employees don't commute TO work, they commute from their homes to bigger cities on weekends. It's still decidedly far from ideal but it beats spending 1.5 hours on a commute every single day.
Tech jobs, especially the type held by HN readers tend to be clustered together in expensive real estate markets so naturally it would be a top issue in the minds of most here. Even for someone like myself who works remotely from the north Georgia mountains and has no problem affording a large home with acreage, the housing woes of tech hubs is a concern because it becomes a public policy issue that can have impacts beyond the expensive areas they're meant to address.
Yes, because we're competing with each other. If there's 5 houses and 6 well-paid developers bidding on them you still have a problem.
(Pity the poor teacher, nurse, etc. who's just SOL)
Not just with each other but if landlords and real estate companies far more wealthier then us, which inflate the demand to a level that doesn’t make any sense. That’s why even earning a top 5% salary you still can’t afford a home close to city centers.
I don't really see how I'm competing with real estate companies and landlords, though. How exactly do they inflate demand for housing?
I mean, if there's 5 properties for rent instead of sale in the example I gave you still have the same core problem.
If 100 people need homes and you only have 50, then the people with the most money they can/want to spend on housing will get it.
It's attenuated by the willingness of people to have roommates, move in with family (if around) etc. so there can be more latent demand than is immediately present. Even if you have no homeless but a whole city is 4 rich tech workers per 3 bed apartment, there's still plenty of demand.
They don't inflate demand, they inflate pricing. To buy a house you are competing with all the peope + all the companies that see it as an investment opportunity.
It’s not just high salaries, you could be competing against someone with a moderate salary and an inheritance.
Housing is probably the single biggest expense category for most people. Even highly paid people, who likely live in much higher cost-of-living areas.
Healthcare is the second biggest.
Food, clothing, and other sundries are a joke by comparison.
Because access to real estate affects your access to high income jobs. These people are highly paid precisely because they pay attention to real estate.
It's easy. Its the same in all major cities in Europe. Entertainment is almost free, healthy food is cheap, medical care is mostly free, education is free, sports are cheap, traveling is super cheap. Everyone puts all of their money in real estate, supply is extremely restricted, demand is bigger every month, prices skyrocket.
at the moment Its big for me, because I'm right now looking to buy a new place to move to for better school options for the kids and a shorter commute for me.
but otherwise. little to no interest.
Cities Where Job Growth Is Outpacing New Homes *(In the US)