4 ms·

I think it is a place to park money. Homes in highly desirable areas tend to maintain their value and usually increase over time. If you're sitting on hundreds

by imgabe 10y ago

I think it is a place to park money. Homes in highly desirable areas tend to maintain their value and usually increase over time. If you're sitting on hundreds of millions or billions of dollars, you can't just stick it all in a savings account or an index fund. It has to go somewhere. Real estate is one place. Consider a $20 million Manhattan apartment. Even if it has a "management fee" of $5k per month (not uncommon), that's still only 0.3% per year. Far less than you'd pay to a hedge fund or other investment manager to hold on to the money. Ultimately I think it will be self-defeating. If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there.

vegabook 10y ago
It is also a function of inflation. Chronic negative real interest rates and quantitative easing across the developed world, used to prop up banks, disincentize traditional savings vehicles such as bonds, while property is usually a good inflation hedge that is less risky than stocks.
arkades 10y ago
> If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there. Already happening in some places. The average rent of a 1BR in Manhattan leveled off a couple years ago, roughly equal to the average 1BR in Brooklyn. All but the most successful young professionals have fled the city for the boroughs; the artists fled ahead of them, so all the fun night life that used to make NYC so exciting is already out in Queens (for a while it was in Brooklyn, but I think a lot has been pushed out there already, too). NYC, now, is a lot more dead by comparison. It's still fun for tourists, and the place to be for the sort of evening life that is either more expensive (fine dining) or less capable of flight to the outer boroughs (museums), but if you're a local...
deleted 10y ago
[deleted]
mafribe 10y ago
Far less than you'd pay to a hedge fund or other investment manager to hold on to the money. And yet, renting it out or AirBnBing it would be what? +$10k per month? There are not many people rich enough not to care about foregoing that much money every month.
- 0xcde4c3db 10y ago
  > There are not many people rich enough not to care about foregoing that much money every month. However, the few people who are that rich hold a wildly disproportionate share of total real estate. I don't remember the exact numbers and am having trouble finding a decent reference, but it's something like 10% of real estate being held by the top 0.01%.
  - mafribe 10y ago
    10% of real estate being held by the top 0.01%. First I doubt the veracity of such claims. Second, yes, you are right, there are real estate tycoons owning a lot of property, but they typically make their money by renting and selling dwellings, not by leaving them empty. For example which of the world's richest real estate tycoons in the list [1] is leaving substantial numbers of their property empty? My conjecture is: nobody. [1] https://www.forbes.com/sites/erincarlyle/2016/03/14/the-20-richest-real-estate-barons-in-the-world-2016/#7220bd636540 https://www.forbes.com/sites/erincarlyle/2016/03/14/the-20-r...

by imgabe 10y ago

vegabook 10y ago

It is also a function of inflation. Chronic negative real interest rates and quantitative easing across the developed world, used to prop up banks, disincentize traditional savings vehicles such as bonds, while property is usually a good inflation hedge that is less risky than stocks.

arkades 10y ago

> If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there. Already happening in some places. The average rent of a 1BR in Manhattan leveled off a couple years ago, roughly equal to the average 1BR in Brooklyn. All but the most successful young professionals have fled the city for the boroughs; the artists fled ahead of them, so all the fun night life that used to make NYC so exciting is already out in Queens (for a while it was in Brooklyn, but I think a lot has been pushed out there already, too). NYC, now, is a lot more dead by comparison. It's still fun for tourists, and the place to be for the sort of evening life that is either more expensive (fine dining) or less capable of flight to the outer boroughs (museums), but if you're a local...

deleted 10y ago

[deleted]

mafribe 10y ago

Far less than you'd pay to a hedge fund or other investment manager to hold on to the money. And yet, renting it out or AirBnBing it would be what? +$10k per month? There are not many people rich enough not to care about foregoing that much money every month.

0xcde4c3db 10y ago
> There are not many people rich enough not to care about foregoing that much money every month. However, the few people who are that rich hold a wildly disproportionate share of total real estate. I don't remember the exact numbers and am having trouble finding a decent reference, but it's something like 10% of real estate being held by the top 0.01%.
- mafribe 10y ago
  10% of real estate being held by the top 0.01%. First I doubt the veracity of such claims. Second, yes, you are right, there are real estate tycoons owning a lot of property, but they typically make their money by renting and selling dwellings, not by leaving them empty. For example which of the world's richest real estate tycoons in the list [1] is leaving substantial numbers of their property empty? My conjecture is: nobody. [1] https://www.forbes.com/sites/erincarlyle/2016/03/14/the-20-richest-real-estate-barons-in-the-world-2016/#7220bd636540 https://www.forbes.com/sites/erincarlyle/2016/03/14/the-20-r...