Rents are high due to high demand in an area where there isn't much of an increase in supply that would normally help reduce prices if that were possible.
That is quite insane. I guess many owners keep their flats empty rather than renting them under these conditions. Ultimately, this decreases supply and drives prices up.
The returns are high because rents are high. The rents are high because demand is high.
Property investors might drive up the purchase prices, but the high rental prices demonstrate that they are not responsible for the overall housing situation.
High rents in many places. The cost of homes going up because of lack of supply and now because of mortgage rates. Where I used to live the cost of starter homes has gone through the roof, and there's tight supply. I rented them out for $1k-ish and now rents are double that...all in about 5 years.
Add in landlord unfriendly policies, and rents go up even more. In some areas, these policies are driving out individual landlords, leaving only institutional investors who look for any excuse to raise rents.
Rents are expensive now with no end of increases in sight.
Rents aren’t increasing that rapidly compared to real estate prices. There is a lot of slack supply as far as rentals go, to the extreme that many speculators don’t even bother renovating their properties for the rental market.
Of course high rents are caused by the investors. After all, rents are huge part of the return on their investment and also huge factor in determining the asset price.
Solution to rental crisis is the reduction of what percentage of people rent vs buy. With a flood of cheap properties on the market more people would consider buying. Also they'd need smaller mortgages so they could be easier to acquire.
If it was just investors why would rent be as close to mortgage payment amounts as it is? The vacancy rate is low. Demand is high. Demand is high even among people with more money than me so there are a lot of places that both sell for more than I can afford, and rent for more than I can afford.
People are competing for the more desirable neighborhoods, whether renting from an investor or buying outright, that's what makes it an attractive investment in the first place. They'd still be competing, so the prices would still go up until an equilibrium was reached. Maybe just slower?
I can speak for Hong Kong, the return on investment on a rental property is around 2.5% (in the case of the apartment I rent it's 2.6%). The reason why rent is so cheap is I believe due to a lot of speculation by people buying in the hope that the price will increase. But this creates a lot of landlords who want to rent and unfortunately for those renters the people renting can only pay so much a month.
Landlords still expect to make a profit with the rising prices though so think that the rent being this low is not an issue but between the NSL and the changes by mainland China, it's unlikely their bet will pay off
I've seen a similar situation in Malaysia where there's a massive amount of speculative investments in luxury condos leading to 38% of the luxury condos being empty. The landlords are just buying it for speculation they don't expect to make money with rentals and that drives the prices of rentals down
This happens to a large degree even without rent control. Miami is full of properties owned by snowbirds who only visit for a few months in the winter or by rich investors who figure a penthouse on South Beach isn’t likely to lose value any time soon. This is especially true of investors from South America who are happy to own a stable investment in US dollars.
I’m not convinced it happens so much more in SF to cause the high rents. I think years of building almost nothing after the 208 crisis while jobs exploded is responsible.
Is it because the owner/speculators don’t want to rent them out because the laws allow squatting? There are articles that say that rental prices have increased (I think I read somewhere between 7 and 15%) but given how much that person was paying (even to a pretend owner), people just can’t afford to pay much. It may not be worthwhile to the owners to rent them out for so little. The hassle of bad tenants and having to refurbish after tenants may mean that you end up losing money. Also, increase in rental prices should be expected given the worldwide money pumping. The exception will be areas like SF with the move to WFH.
It also puts downward pressure on landlords, since as they increase the rent, there's less and less people who can be tenants.
Sadly it might not help around here, because right now, it is very profitable to just buy property and leave it empty, since the prices are perpetually rising.
OK I'm not a landlord/capitalist apologist but it sure does make sense to me that rents rise in part because there are way more people that want to live in an area than available units.
For example Downtown LA and Koreatown are putting up large apartment buildings like crazy, because the zoning allows them to, and rents have not increased nearly as much as other popular LA areas that are mostly single-family zoned, such as Santa Monica.
This is why Minnesota and now recently California basically upzoned the entire state, because upzoning with local ordinances neighborhood by neighborhood is almost always defeated by NIMBYs, which are generally a combination of of local homeowners and local small-time landlords.
Don't forget that a huge portion of US landlords are "mom and pop" landlords, which have a massive portion of their net worth wrapped up a handful of rental units and don't have the capital to build net new units. These people are more economically opposed to new housing than a large developer who can stomach the capital outlay for a new building.
When they are allowed to developers can profitably build dense housing, which produces net new units into the market, which helps combat rising rent.
In my country, rents are increasing now after the markets have already been flat or down, the startup boom has long fizzled out, and there are layoffs almost every day.
It's baffling. Rents were down during the pandemic but they've now rocketed up 50-100% in some areas.
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