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  #21  
Old Posted Oct 11, 2018, 3:42 PM
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Do you own property(ies) in London or elsewhere?
Yes. And there is a mortgage. It’s financially inefficient to not have a mortgage.
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  #22  
Old Posted Oct 11, 2018, 4:10 PM
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Yes. And there is a mortgage. It’s financially inefficient to not have a mortgage.
Yes, I commiserate, but if like me, you had enough money to buy a house outright and pay for upkeep over time, you would probably do it, unless you suffered from dementia praecox.

I am selling my house in the city for a bigger but less expensive house next month. The new house is a half hour drive from downtown and over time, the money I save on not carrying debt will easily afford me roofing and other costs down the road. No need to give a lender what I already can afford.

A friend of mine's mortgage was nixed by the insurer a couple of years ago when he was treated for cancer. So, he has no more debt on the house, however he is heretofore a major risk to a lender and his borrowing ability is diminished. It all depends how much money you have to play with.

Last edited by montréaliste; Oct 11, 2018 at 5:03 PM.
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  #23  
Old Posted Oct 15, 2018, 2:19 PM
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Sorry Jonesy, but none of your suggestions work (e.g., everyone would find a way to defer tax, and then it wouldn’t achieve the objective), and the things you dismiss as “not a big deal” are in fact a big deal.

What would really happen is that real estate values would crash through the floor. There’s absolutely no way that any government does that on purpose. Probably not even the Corbynites.

The systems he describes more or less exist in Toronto and real estate prices certainly haven't collapsed here. The City has a number of mechanisms for low-income and particularly senior property owners (primarily deferral based) and recently a new property code was created by the Province to allow certain private buildings housing cultural institutions to be taxed by the City at lower rates. I've spoken to city staff about the low-income deferral program and it's relatively easy to administer even with a thorough vetting process. Even for very expensive homes the deferral amount ends up being a very small percentage of total tax revenue which is easily shifted to the remaining property base due to how the system is set up.

Of course we've been on an LVT system for many decades so don't have to worry about the pains of switching over. However, the manner in which this was done in Ontario was changed about 20 years ago (shifted from municipal to provincial valuation) which resulted in phased-in assessments for commercial properties.
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  #24  
Old Posted Oct 15, 2018, 2:54 PM
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Originally Posted by montréaliste View Post
Yes, I commiserate, but if like me, you had enough money to buy a house outright and pay for upkeep over time, you would probably do it, unless you suffered from dementia praecox.
Not sure how things work in UK/ Canada but we could pay off our house tomorrow if we wanted to but we make more with that money invested, the loan builds credit and we tax deduction on interest. Buying outright works if you have a huge amount of disposable income. Same thing with buying a car.
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  #25  
Old Posted Oct 15, 2018, 3:08 PM
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No mortgage interest tax deduction in the UK, that did exist in the 80s/90s but it was phased out some 20 years ago.

Still it can make sense to keep a mortgage of your investments can generate a larger return than you are paying on the home loan, and at the very low rates we have at the moment that is often the case. Maybe if you were extremely risk-averse and wouldn't put your money in anything other than an instant access bank account then you would be better off paying down the mortgage as those accounts pay virtually nothing these days. But if you are that risk-averse you will be losing out no matter what you do I think.
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  #26  
Old Posted Oct 15, 2018, 6:10 PM
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You pay most of the mortgage interest upfront with the loan anyway so its not much after the first few years.
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  #27  
Old Posted Oct 15, 2018, 6:51 PM
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Originally Posted by montréaliste View Post
Yes, I commiserate, but if like me, you had enough money to buy a house outright and pay for upkeep over time, you would probably do it, unless you suffered from dementia praecox.

I am selling my house in the city for a bigger but less expensive house next month. The new house is a half hour drive from downtown and over time, the money I save on not carrying debt will easily afford me roofing and other costs down the road. No need to give a lender what I already can afford.

A friend of mine's mortgage was nixed by the insurer a couple of years ago when he was treated for cancer. So, he has no more debt on the house, however he is heretofore a major risk to a lender and his borrowing ability is diminished. It all depends how much money you have to play with.
No, I would remortgage the apartment/house and invest the capital in an asset that returns more than the 4% that a fixed rate mortgage would cost. To not do so is value destructive.

Even billionaires mortgage their properties. They are cash buyers (and usually have to be because the sellers won’t take an offer that’s contingent on financing), but then they take out a mortgage on it after closing.

See: https://www.wsj.com/articles/what-be...ges-1537457152
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  #28  
Old Posted Oct 15, 2018, 8:20 PM
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This article is about New York but probably fits the same general theme:

https://www.theatlantic.com/ideas/ar...acancy/572911/

The first thing NYC needs to do is prevent retail space from being converted to other uses (because it’s then very difficult if not impossible to convert it back). Eventually rents will find a level that successful businesses can afford.
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  #29  
Old Posted Oct 16, 2018, 3:14 AM
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Originally Posted by 10023 View Post
No, I would remortgage the apartment/house and invest the capital in an asset that returns more than the 4% that a fixed rate mortgage would cost. To not do so is value destructive.

Even billionaires mortgage their properties. They are cash buyers (and usually have to be because the sellers won’t take an offer that’s contingent on financing), but then they take out a mortgage on it after closing.

See: https://www.wsj.com/articles/what-be...ges-1537457152
That's why billionaires only get to be billionaires.
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  #30  
Old Posted Oct 16, 2018, 4:35 AM
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Originally Posted by 10023 View Post
This article is about New York but probably fits the same general theme:

https://www.theatlantic.com/ideas/ar...acancy/572911/

The first thing NYC needs to do is prevent retail space from being converted to other uses (because it’s then very difficult if not impossible to convert it back). Eventually rents will find a level that successful businesses can afford.
Retail needs a lot more than cheap space to make sense.

However some outcomes are obvious....some spreading out of the typical store into more space per $ of sales, more nail salons and other low-margin businesses, and some more interesting creative businesses mixed in.
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  #31  
Old Posted Oct 16, 2018, 5:57 AM
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Retail needs a lot more than cheap space to make sense.

However some outcomes are obvious....some spreading out of the typical store into more space per $ of sales, more nail salons and other low-margin businesses, and some more interesting creative businesses mixed in.
Did you read the article?
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  #32  
Old Posted Oct 16, 2018, 6:07 AM
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Nothing in the article differs from my post in a quick read, except for some opinion from an urban thinker who's not in commercial real estate.
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  #33  
Old Posted Oct 16, 2018, 6:26 AM
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Nothing in the article differs from my post in a quick read, except for some opinion from an urban thinker who's not in commercial real estate.
Well it points out that it’s things like nail and hair salons that have survived, not because they’re low-margin (of course), but because one needs to be physically present to purchase their services. You can’t buy a haircut on the Internet (well you can, but you still have to show up for it).

It also discusses the fact that while pop-ups and “interesting creative businesses” (as you call them) could be a solution, the problem is that landlords avoid signing short-term leases with them and instead hold out for a deep pocketed tenant like a bank (which is exactly the sort of thing that should go online, but I disgress).

You also mention “spreading out” the typical store to have lower sales per square foot, which absolutely, unequivocally, without a doubt would require lower rent per square foot to work economically.

So no, it’s really more a matter of reducing rents than anything else. It’s also about reserving retail space for retail uses (which maintains supply and helps to achieve the former).

And where the link to the London article comes in is that it’s also necessary to encourage those short-term uses (“meanwhile uses” in the London article), which could be done through a combination of carrots and sticks. The stick could be tax on vacant space. The carrot could be more rights for landlords and fewer tenant protections, so that a landlord could sign a short-term lease with a pop-up or creative project and not worry that they are now stuck with that tenant long-term. Like hiring and firing employees, if you make it impossible to terminate the relationship, it will in many cases not be formed in the first place.


(Btw, I have plenty of experience with real estate to have views on this, both on the tenant and landlord side.)
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  #34  
Old Posted Oct 16, 2018, 2:15 PM
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Online retail has decimated urban retail. We were in Paris last month and I couldn't help but notice the vast majority of ground level retail were businesses that could not be replicated online; food, pubs, services, salons, cheesy gift shops, etc.
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  #35  
Old Posted Oct 16, 2018, 3:54 PM
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Online retail has decimated urban retail. We were in Paris last month and I couldn't help but notice the vast majority of ground level retail were businesses that could not be replicated online; food, pubs, services, salons, cheesy gift shops, etc.
I think that depends where you are in Paris (or anywhere). The Marais (probably the nearest equivalent to the West Village) continues to be full of boutiques. And I haven’t seen vacant storefronts in high end shopping streets in London.

The mass market is being decimated everywhere but from what I’m hearing about NYC, the problem there is quite acute and fairly unique among its peer cities. Though I also have to admit that I haven’t really paid attention when visiting recently.
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  #36  
Old Posted Oct 16, 2018, 5:42 PM
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Well it points out that it’s things like nail and hair salons that have survived, not because they’re low-margin (of course), but because one needs to be physically present to purchase their services. You can’t buy a haircut on the Internet (well you can, but you still have to show up for it).

It also discusses the fact that while pop-ups and “interesting creative businesses” (as you call them) could be a solution, the problem is that landlords avoid signing short-term leases with them and instead hold out for a deep pocketed tenant like a bank (which is exactly the sort of thing that should go online, but I disgress).

You also mention “spreading out” the typical store to have lower sales per square foot, which absolutely, unequivocally, without a doubt would require lower rent per square foot to work economically.

So no, it’s really more a matter of reducing rents than anything else. It’s also about reserving retail space for retail uses (which maintains supply and helps to achieve the former).

And where the link to the London article comes in is that it’s also necessary to encourage those short-term uses (“meanwhile uses” in the London article), which could be done through a combination of carrots and sticks. The stick could be tax on vacant space. The carrot could be more rights for landlords and fewer tenant protections, so that a landlord could sign a short-term lease with a pop-up or creative project and not worry that they are now stuck with that tenant long-term. Like hiring and firing employees, if you make it impossible to terminate the relationship, it will in many cases not be formed in the first place.


(Btw, I have plenty of experience with real estate to have views on this, both on the tenant and landlord side.)
My point was that retail is declining, something I'm studying as a contractor that builds urban retail as well as other project types.

The trend is clearly less retail space per capita. Lower rents can counteract some of this, but only some. It can fill in existing retail space at whatever terms they can get, but the results in sales, activity level, etc. won't be proportional to the space kept. It'll be about finding lesser uses to fill space. Sometimes those lesser uses will be mom & pop finally making the pillow store come through. But mostly it'll be more spreading out, more vacancy, and more low-overhead places of various types.

More fundamentally, we're going to have to be ok with major urban streets not being lined with continuous retail, outside of the major destination areas. Like apartments on the first floor, but up a few steps (pre-ADA) for privacy.
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  #37  
Old Posted Oct 16, 2018, 8:35 PM
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The trend in the UK is similar, huge amounts of spending is going online, I think its up to 20% of retail spending now, one of the highest figures in the world, and that will only increase. That means there is obviously less demand for stores selling stuff that is easily and more cheaply bought online.

The consequences of that depend on the location I think, if you have a big and prosperous prosperous local market, or if you attract visitors from outside the local area like tourism and business centres then those stores will easily be replaced by 'service retail', the kind of businesses where you need to be physically present to consume what they are offering.

If you don't have that and the only reason people previously came to the stores was because that was the only practical place local people could buy 'stuff' then those places are really struggling with excess retail space.
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