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I wonder how the American student debt explains how the same thing is happening to housing in Denmark. Now, I’m not arguing against the article, having high stu

by devjab 3y ago

I wonder how the American student debt explains how the same thing is happening to housing in Denmark. Now, I’m not arguing against the article, having high student debt is certainly going to impact your ability to own a home, but it’s certainly not the only factor which is at play. Our sister company develops housing for renting. Which was a very lucrative business back when interest rates weren’t evil. What they really do, however, isn’t to rent out homes, it’s making investors money. Keeping rent high is a bigger part of that journey than actually renting out homes, because ultimately the end goal isn’t to own the building, it’s to either sell it or use it as leverage in other projects that makes our investors money. In the city I live in, we have 10.000 empty dental right now, which is quite a high number in a city of a quarter of a million people, but the rent isn’t going down. It’s not going down, because it’s hard to increase if once you lower it, and since the goal isn’t really to rent out these homes but rather to make investors returns, it’s better to ride a decade of empty rentals than to lower the rent. It’s better because the finance data looks better when the potential profits are higher, and as long as that is more important than actually realising that profit then rent isn’t going to come down. Now, obviously there is some competition in the rental market, but every investment bank developer is sort of in our shoes and while it’s obviously a little bit of a game of chicken, it’s not really, because there is still a housing shortage in popular towns. But because we’re playing chicken, the smaller sized rental companies don’t actually need to compete that hard on pricing because we won’t lower ours, and there is enough of a demand that they can get a way with just being in our slipstream. I’m not sure if that’s a thing in America, and there is a lot more to it than this. Here in Denmark we have the same urbanisation and population decline as many other places, so housing is very uneven with urban areas increasing prices while rural areas see theirs plummeting to the point that some homes are frankly unsellable. But it’s mainly due to general debt, and how we let people borrow too much money, which student debt is part of, but not the single contributor to.

quickthrower2 3y ago
How do the 10,000 landlords collude to not rent out their apartments? In Sydney it is way more free-market like. Rents tanked during covid and rocketed after (relative to their covid low). I feel like there are 2 types of owner. Ones that rent them out, and one's that don't. Not ones that rent them out, then let them be empty when rents threaten to fall.
- PartiallyTyped 3y ago
  You don't need 10k landlords, you need property management firms which all happen to use the same software which effectively creates a cartel even though it is not a coordinated one [1]. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
  - simmerup 3y ago
    Didn’t a similar thing happen with car prices on auto trader?
  - refurb 3y ago
    Software doesn't mean that landlord's are still at the whim of market forces. If rent goes down but the software says to charge more, then the unit stays empty.
    - PartiallyTyped 3y ago
      As you can read in other comments in this thread; that is preferable as there is higher potential even though said gains may never be realised.
      - refurb 3y ago
        Meh.. while corporate landlord's may be more willing to leave a place empty, it doesn't take long for that to be a losing proposition. With the exception of a few US cities with rent control so strict you practically can't increase rent by more than a very small amount (San Francisco), most cities, even those with rent control allow for single digit percentage increases that can allow you to adjust rent over a relatively short period. If you refuse to drop rent by 5%, all it takes is 1 month of an empty unit to exceed the loss from taking a 5% lower rent for one and a half years. Add on top that nobody can predict the future including when rents will go back up, leaving units empty is a terrible financial decision. That said, it places with ridiculous rent control where evicting a tenant is almost impossible except the most extreme circumstances, I could see where it makes more sense, especially if a landlord is looking to sell as empty units are worth a substantial amount more than occupied units.
vjerancrnjak 3y ago
Isn’t there a tax on empty apartments? If not, why not? If yes, why is it so low that people still do not rent? Make any property owner to actually use the property (as is the case for agricultural properties) and the prices will fall. This realestate game is evil, not banks raising interest rates in insanely rich countries.
ak_111 3y ago
There is an old saying "When America sneezes, the world catches a cold" An economy as big as the US pumping that much liquidity and free money into its economy will eventually overspill to other economies. Even if the spillage is tiny relative to the size of the US economy it will probably be huge relative to many other economies and in turn will cause significant overspill there. Nordics in particular, due to strong property rights, building regulations and transparent RE market, were probably high on the list of any wall street banker looking elsewhere to invest in RE after having exhausted yields in the US. See also what wall street indirectly did to Iceland during the great financial crisis.
rpcope1 3y ago
> Which was a very lucrative business back when interest rates weren’t evil. I don't know how far back you're referring to, but I can't believe that you would call a single digit interest rate "evil." If there was ever a bad thing, it's the incredibly loose market for debt we had up until recently, where central banks suppressed rates with ZIRP or NIRP. A huge amount of the very mess we're in is because of grossly overaccomodative monetary policy which has distorted the price of everything, and has surprisingly far-reaching effects. It's very much a good thing that the era of free and easy money is (hopefully) over.

by devjab 3y ago

quickthrower2 3y ago

How do the 10,000 landlords collude to not rent out their apartments? In Sydney it is way more free-market like. Rents tanked during covid and rocketed after (relative to their covid low). I feel like there are 2 types of owner. Ones that rent them out, and one's that don't. Not ones that rent them out, then let them be empty when rents threaten to fall.

PartiallyTyped 3y ago
You don't need 10k landlords, you need property management firms which all happen to use the same software which effectively creates a cartel even though it is not a coordinated one [1]. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
- simmerup 3y ago
  Didn’t a similar thing happen with car prices on auto trader?
- refurb 3y ago
  Software doesn't mean that landlord's are still at the whim of market forces. If rent goes down but the software says to charge more, then the unit stays empty.
  - PartiallyTyped 3y ago
    As you can read in other comments in this thread; that is preferable as there is higher potential even though said gains may never be realised.
    - refurb 3y ago
      Meh.. while corporate landlord's may be more willing to leave a place empty, it doesn't take long for that to be a losing proposition. With the exception of a few US cities with rent control so strict you practically can't increase rent by more than a very small amount (San Francisco), most cities, even those with rent control allow for single digit percentage increases that can allow you to adjust rent over a relatively short period. If you refuse to drop rent by 5%, all it takes is 1 month of an empty unit to exceed the loss from taking a 5% lower rent for one and a half years. Add on top that nobody can predict the future including when rents will go back up, leaving units empty is a terrible financial decision. That said, it places with ridiculous rent control where evicting a tenant is almost impossible except the most extreme circumstances, I could see where it makes more sense, especially if a landlord is looking to sell as empty units are worth a substantial amount more than occupied units.

vjerancrnjak 3y ago

Isn’t there a tax on empty apartments? If not, why not? If yes, why is it so low that people still do not rent? Make any property owner to actually use the property (as is the case for agricultural properties) and the prices will fall. This realestate game is evil, not banks raising interest rates in insanely rich countries.

ak_111 3y ago

There is an old saying "When America sneezes, the world catches a cold" An economy as big as the US pumping that much liquidity and free money into its economy will eventually overspill to other economies. Even if the spillage is tiny relative to the size of the US economy it will probably be huge relative to many other economies and in turn will cause significant overspill there. Nordics in particular, due to strong property rights, building regulations and transparent RE market, were probably high on the list of any wall street banker looking elsewhere to invest in RE after having exhausted yields in the US. See also what wall street indirectly did to Iceland during the great financial crisis.

rpcope1 3y ago

> Which was a very lucrative business back when interest rates weren’t evil. I don't know how far back you're referring to, but I can't believe that you would call a single digit interest rate "evil." If there was ever a bad thing, it's the incredibly loose market for debt we had up until recently, where central banks suppressed rates with ZIRP or NIRP. A huge amount of the very mess we're in is because of grossly overaccomodative monetary policy which has distorted the price of everything, and has surprisingly far-reaching effects. It's very much a good thing that the era of free and easy money is (hopefully) over.