5 ms·

>more people can no longer afford to buy but still need somewhere to live, causing the rent market to become more competitive It seems like you are double coun

>more people can no longer afford to buy but still need somewhere to live, causing the rent market to become more competitive It seems like you are double counting here. If high prices result in units becoming investor-owned and rented out instead of owner-occcupied, that means the rental supply is larger, so the foiled-owner-occupiers shouldn’t be crowding out more renters. To put it simply, we are fitting the same number of humans in the same number of buildings here, and just changing whether the person who lives there is the owner. > and the rents go up because owners charge what the market can bare Landlords always charge what the market can bear, how does the sale price of the unit move that number (other than the double counting argument above)?

killjoywashere 8y ago
Let's take a pass on the dingbat apartments and look at the single-family-home-wingdings, which can also be stuffed into REITs. The corrupt REIT doesn't care if it buys 1 or 10 houses, so long as they are bought. The local owners cheer the purchase even if the house sits empty. Anyone who wants to buy into that market has to make more money. So they negotiate salary. The companies then pay more in salary. Corporate profits are at an all-time high, so it's hard to justify not paying the salary, especially in the face of housing costs. So now the would-be owner who finds themselves stuffed out of a remarkably expensive housing market (it increased significantly between the interview and the start date) moves into the rental market, which, while high, is nothing compared to the first few years of home ownership. Someone who could afford a house in the local market can afford the rent, particularly if they make the painful decision to forgo pets, or (as in our case) give their pets to their parents. "For a couple years, we'll be back".
michaelt 8y ago
At least in London, I have heard it claimed [1] that foreign investors buy properties and leave them vacant, as London's rising house prices represent a sufficient return on investment and remove the inconvenience and risk of dealing with tenants. Of course, it's hard to measure this stuff precisely, because given the current attitudes, if you were doing that the last thing you'd do is report yourself to the government. [1] https://www.theguardian.com/society/2017/aug/01/names-of-wealthy-empty-home-owners-in-grenfell-borough-revealed https://www.theguardian.com/society/2017/aug/01/names-of-wea...
- C1sc0cat 8y ago
  I thought it was a way of moving your cash (whether it is legit or not) outside your country. To stop your home government expropriating your money and also as a bolt hole if the peasants revolt and start hanging people from lampposts.
- Mindwipe 8y ago
  Yeah, that is certainly the reasoning that pushing prices up is based on in London. Another angle is that more expensive properties are more efficient, so the bubble of foreign investment in property has lead to a rise in the construction of hyper-premium properties which the market does not especially demand, and a lack of construction of mid-range or lower tier housing, pushing the prices up in those sectors.
  - YorkshireSeason 8y ago
    rise in the construction of hyper-premium properties which the market does not especially demand, If you look at the parts of London with extreme building activity over the last few years (Nine Elms, Battersea Power Stn, Docklands, Aldgate, Old Street, Stratford, Kings X), you'll find that almost everything falls into the studio, 1-bedroom or 2-bedroom range. There has also been a lot of development of commercial student accomodations, see e.g. [1]. Pretty much the antithesis of "leaving things empty". [1] https://www.theguardian.com/education/2018/may/27/revealed-developers-cashing-in-privatisation-uk-student-housing https://www.theguardian.com/education/2018/may/27/revealed-d...
- YorkshireSeason 8y ago
  Why on earth would somebody who's interested in profit leave a property empty, rather than cash in on rent from tenants? In other words, why would investors choose loosing money over getting income? It's not like its hard to get tenants. It's not like it's hard to manage tenants, and it's even easy to get rid of them if you need to in the UK (unlike in some other countries). There's a whole support industry for finding and managing tenants. It's almost effortless. I'm afraid I don't believe stories like that quoted above. As an edge case it may occasionally happen (especially at the high-end, e.g. flats that cost > £2 mil), but the normal case is that buyers cash in on rental income. Moreover, I posit that the number of properties left vacant is so marginal that it doesn't affect London's housing market. For example there has been lots of building activity in Aldgate, near Old Street, around Stratford (former Olympic area), and in the Docklands. They are mostly studio flats, 1-, or 2-bedrooms, all tiny, and all quickly snapped up. London public transport (e.g. Central Line) is insanely busy now in parts because so many new people have moved to e.g. Stratford. Source: Anecdotal, I speak with a lot of builders, property developers, and architects in London.
shubb 8y ago
I've been thinking about this lately because I want to rent out my flat and move abroad. It turns out that, if I take into account my mortage, building charges, and expected empty time between tenants the minimum I can charge for rent is... actually kind of similar to the market rent. It would seem like there is a floor to London rents, and it is related to the mortage payment, which is related to the value. If the value was 50% lower, then landlords renting at the current level would be undercut.
- dragandj 8y ago
  I understand why you think that is the minimum. But, let's say that your mortgage is 100, building charges 10, and expected empty time cost another ten, 120 in total. How is charging 0 (not being able to rent it because no one is willing to match your minimum) better than, say, renting it for 110? I assume that you already own the property, so you have no choice of directing that mortgage to other investment opportunities.
- motohagiography 8y ago
  Do you pay income tax on the rental income as well? This would add about %30-45 to your mortgage payment breakeven as well, no? If your mortgage payment is $1000/mo, you need that in after-tax dollars in addition to gap months and maintenance. This pushes rents up for single property landlords in the top marginal rate, or am I missing something.
  - jnwatson 8y ago
    You only pay income tax on your net profit (in the US at least).
    - motohagiography 8y ago
      Net expenses, but the equity in the property seems like income (as you can tell iana landlord). Income taxes likely contribute a significant percentage of the difference between mortgage payments an rent prices. For a REIT, this is different, but for an individual owner renting out a second property and paying income taxes on the rent income, would this not create a significant difference?

killjoywashere 8y ago

Let's take a pass on the dingbat apartments and look at the single-family-home-wingdings, which can also be stuffed into REITs. The corrupt REIT doesn't care if it buys 1 or 10 houses, so long as they are bought. The local owners cheer the purchase even if the house sits empty. Anyone who wants to buy into that market has to make more money. So they negotiate salary. The companies then pay more in salary. Corporate profits are at an all-time high, so it's hard to justify not paying the salary, especially in the face of housing costs. So now the would-be owner who finds themselves stuffed out of a remarkably expensive housing market (it increased significantly between the interview and the start date) moves into the rental market, which, while high, is nothing compared to the first few years of home ownership. Someone who could afford a house in the local market can afford the rent, particularly if they make the painful decision to forgo pets, or (as in our case) give their pets to their parents. "For a couple years, we'll be back".

michaelt 8y ago

At least in London, I have heard it claimed [1] that foreign investors buy properties and leave them vacant, as London's rising house prices represent a sufficient return on investment and remove the inconvenience and risk of dealing with tenants. Of course, it's hard to measure this stuff precisely, because given the current attitudes, if you were doing that the last thing you'd do is report yourself to the government. [1] https://www.theguardian.com/society/2017/aug/01/names-of-wealthy-empty-home-owners-in-grenfell-borough-revealed https://www.theguardian.com/society/2017/aug/01/names-of-wea...

C1sc0cat 8y ago
I thought it was a way of moving your cash (whether it is legit or not) outside your country. To stop your home government expropriating your money and also as a bolt hole if the peasants revolt and start hanging people from lampposts.
Mindwipe 8y ago
Yeah, that is certainly the reasoning that pushing prices up is based on in London. Another angle is that more expensive properties are more efficient, so the bubble of foreign investment in property has lead to a rise in the construction of hyper-premium properties which the market does not especially demand, and a lack of construction of mid-range or lower tier housing, pushing the prices up in those sectors.
- YorkshireSeason 8y ago
  rise in the construction of hyper-premium properties which the market does not especially demand, If you look at the parts of London with extreme building activity over the last few years (Nine Elms, Battersea Power Stn, Docklands, Aldgate, Old Street, Stratford, Kings X), you'll find that almost everything falls into the studio, 1-bedroom or 2-bedroom range. There has also been a lot of development of commercial student accomodations, see e.g. [1]. Pretty much the antithesis of "leaving things empty". [1] https://www.theguardian.com/education/2018/may/27/revealed-developers-cashing-in-privatisation-uk-student-housing https://www.theguardian.com/education/2018/may/27/revealed-d...
YorkshireSeason 8y ago
Why on earth would somebody who's interested in profit leave a property empty, rather than cash in on rent from tenants? In other words, why would investors choose loosing money over getting income? It's not like its hard to get tenants. It's not like it's hard to manage tenants, and it's even easy to get rid of them if you need to in the UK (unlike in some other countries). There's a whole support industry for finding and managing tenants. It's almost effortless. I'm afraid I don't believe stories like that quoted above. As an edge case it may occasionally happen (especially at the high-end, e.g. flats that cost > £2 mil), but the normal case is that buyers cash in on rental income. Moreover, I posit that the number of properties left vacant is so marginal that it doesn't affect London's housing market. For example there has been lots of building activity in Aldgate, near Old Street, around Stratford (former Olympic area), and in the Docklands. They are mostly studio flats, 1-, or 2-bedrooms, all tiny, and all quickly snapped up. London public transport (e.g. Central Line) is insanely busy now in parts because so many new people have moved to e.g. Stratford. Source: Anecdotal, I speak with a lot of builders, property developers, and architects in London.

shubb 8y ago

I've been thinking about this lately because I want to rent out my flat and move abroad. It turns out that, if I take into account my mortage, building charges, and expected empty time between tenants the minimum I can charge for rent is... actually kind of similar to the market rent. It would seem like there is a floor to London rents, and it is related to the mortage payment, which is related to the value. If the value was 50% lower, then landlords renting at the current level would be undercut.

dragandj 8y ago
I understand why you think that is the minimum. But, let's say that your mortgage is 100, building charges 10, and expected empty time cost another ten, 120 in total. How is charging 0 (not being able to rent it because no one is willing to match your minimum) better than, say, renting it for 110? I assume that you already own the property, so you have no choice of directing that mortgage to other investment opportunities.
motohagiography 8y ago
Do you pay income tax on the rental income as well? This would add about %30-45 to your mortgage payment breakeven as well, no? If your mortgage payment is $1000/mo, you need that in after-tax dollars in addition to gap months and maintenance. This pushes rents up for single property landlords in the top marginal rate, or am I missing something.
- jnwatson 8y ago
  You only pay income tax on your net profit (in the US at least).
  - motohagiography 8y ago
    Net expenses, but the equity in the property seems like income (as you can tell iana landlord). Income taxes likely contribute a significant percentage of the difference between mortgage payments an rent prices. For a REIT, this is different, but for an individual owner renting out a second property and paying income taxes on the rent income, would this not create a significant difference?