Many Portuguese, including the middle class, are being priced out of Portugal’s property market by rising rents, surging home prices and climbing mortgage rates.
While “nuance” can indeed be good, it can’t be based on vibes.
If we analyse the data, we know that more than 10% of the active real estate market is subject to international investment and speculation. And the majority of the active real estate market is in major urban centres (with a very big portion in Lisbon alone).
Amazon, when it was first starting out as a book-seller, made a realisation that if they controlled only 6% of a book’s sales they controlled 100% of the price.
If investors control over 6% of the active real estate market, they control the prices. International investors have much more capital than local Portuguese. Investors need prices to keep rising.
The outcome of the current housing crisis is not due to some Portuguese people owning one or two houses. It’s due to international investors buying properties to rent out on Airbnb and expecting their investment to keep rising double percentage digits every year. They might control only around 10% of the market, but they can control the prices with this.
Also, there are enough houses. Portugal doesn’t need to build more houses to solve the housing crisis. Not that building more houses is bad. But it’s not the best and cheapest solution.
The state can eminent-domain empty houses or force them to be rented out long-term. Ban Airbnb. Create laws that enshrine housing as a human right and not a capital market.
But I also support the state building more public housing. That is always good. Public housing ran as a housing co-op is perfect as well. But the state can just buy empty ones and put them under co-ops as well, and that would be likely be cheaper.
In Investment Banking it’s a well known rule that “prices are made on the margin” or in other words that the bulk of the assets on an asset type are rarelly traded and thus do not participate in the making of prices: it’s it only a small percentage of the assets of that type that get traded and is responsible for setting of prices for all the assets of that class.
This is more true for lower liquidity markets like housing (were most units spend decades without being traded) than in Stocksmarkets, so yeah, you only need to push a small percentage of the total housing market (a fraction of the small fraction that gets traded) one way or another to change the price of all houses.
Also if the will was there (which is not, IMHO, as the main secondary source of income of almost all top elected politicians in Portugal is “realestate investment”, even at the local level in the large cities) and now that the highest court has ruled that housing units in appartment buildings cannot get licenses as AirBnB business without the unanimous approval of all owners of all units in that building, a mere 2 measures would correct the problem:
A requirement of being a Resident in Portugal to be able to buy residential realestate in Portugal, like various countries have.
A massive program of building Public Housing.
The first would massivelly reduce Demand from foreign investors (whilst being within EU rules, as there is no discrimination between national and EU citizens as the rule applies the same to all), the second would increase supply and, as pointed above, as prices are made on the margin you don’t need to add that much of a fraction of the whole market in newbuilds to significantly change the price.
That’s true. If the public housing is numerous enough (and not relegated to the peripheries of the urban centers) and properly ran, it would likely have a faster impact on prices than any other thing. That’s how Vienna resolved a lot of their housing issues in the 20th century (then promptly forgot about the solution and abandoned it forever lol. Still Vienna is much cheaper to rent than most other major European cities…).
While “nuance” can indeed be good, it can’t be based on vibes.
If we analyse the data, we know that more than 10% of the active real estate market is subject to international investment and speculation. And the majority of the active real estate market is in major urban centres (with a very big portion in Lisbon alone).
Amazon, when it was first starting out as a book-seller, made a realisation that if they controlled only 6% of a book’s sales they controlled 100% of the price.
If investors control over 6% of the active real estate market, they control the prices. International investors have much more capital than local Portuguese. Investors need prices to keep rising.
The outcome of the current housing crisis is not due to some Portuguese people owning one or two houses. It’s due to international investors buying properties to rent out on Airbnb and expecting their investment to keep rising double percentage digits every year. They might control only around 10% of the market, but they can control the prices with this.
Also, there are enough houses. Portugal doesn’t need to build more houses to solve the housing crisis. Not that building more houses is bad. But it’s not the best and cheapest solution.
The state can eminent-domain empty houses or force them to be rented out long-term. Ban Airbnb. Create laws that enshrine housing as a human right and not a capital market.
But I also support the state building more public housing. That is always good. Public housing ran as a housing co-op is perfect as well. But the state can just buy empty ones and put them under co-ops as well, and that would be likely be cheaper.
In Investment Banking it’s a well known rule that “prices are made on the margin” or in other words that the bulk of the assets on an asset type are rarelly traded and thus do not participate in the making of prices: it’s it only a small percentage of the assets of that type that get traded and is responsible for setting of prices for all the assets of that class.
This is more true for lower liquidity markets like housing (were most units spend decades without being traded) than in Stocksmarkets, so yeah, you only need to push a small percentage of the total housing market (a fraction of the small fraction that gets traded) one way or another to change the price of all houses.
Also if the will was there (which is not, IMHO, as the main secondary source of income of almost all top elected politicians in Portugal is “realestate investment”, even at the local level in the large cities) and now that the highest court has ruled that housing units in appartment buildings cannot get licenses as AirBnB business without the unanimous approval of all owners of all units in that building, a mere 2 measures would correct the problem:
The first would massivelly reduce Demand from foreign investors (whilst being within EU rules, as there is no discrimination between national and EU citizens as the rule applies the same to all), the second would increase supply and, as pointed above, as prices are made on the margin you don’t need to add that much of a fraction of the whole market in newbuilds to significantly change the price.
That’s true. If the public housing is numerous enough (and not relegated to the peripheries of the urban centers) and properly ran, it would likely have a faster impact on prices than any other thing. That’s how Vienna resolved a lot of their housing issues in the 20th century (then promptly forgot about the solution and abandoned it forever lol. Still Vienna is much cheaper to rent than most other major European cities…).