Taoyuan Nights

I was asked on another blog, why am I such a pessimist about the housing market?

Here is my reply.

I’m not a pessimist. I’m an optimist! I’m looking forward to a world (including Taiwan) where people don’t obsess about their worth in terms of how a pile of bricks is valued; where a family can choose to have an extra room AND have a child; where people don’t need to trade their entire working life to own a small, 2-bedroom apartment in nowhere-ville.

In fact, dropping prices is great even for owners! It means you will be able to trade up to an even nicer house, if you like, more cheaply. The world would be a much nicer place if house prices were considerably lower. The only people that gain from high house prices are landowners, housebuilders, very old people (who downsize), banks, estate agents and the government (through taxation). Most people don’t fall into one of these categories.

Besides, housing is not a measure of wealth. A country’s wealth comes from its productive ability in terms of tools, art, ideas, … Housing on the other hand is generally just a (poorly) assembled collection of mud and dead trees. People would hardly go screaming with joy around the streets if food prices doubled, or if water charges tripled, or electricity bills quadrupled. So why should anyone be cheerful when some other basic, needed commodity goes up? It’s bad news for everyone except those who make that commodity or benefit from its trade!

For me, the pessimists are those who think that high house prices are good, when really they tie up the capital of a society in a completely unproductive way, and transfer wealth from young to old in an entirely unfair and disproportionate way.

Anyway, my view on what will happen to housing is not coloured by what I would *like* to happen to housing or what I think is best for society. Rather, it’s just based on what history shows us, and the ‘laws of finance’, as far as they seem to exist. And besides…