Why do you think this rent is extraordinary? Unless you meant that it is extraordinary as a result of extraordinary purchase prices. As a proportion of purchase prices, these rentals are nothing special. Rental prices will lie within a relatively narrow band near the cost of maintaining a mortgage for the simple reason that if they get much higher, people can finance more property purchases and hope to gain on price growth, and if they get much lower, a substantial proportion of investors lose the ability to leverage and so the returns won't be attractive.
> If you walk through Knightsbridge in the evening, at a time when people in well-adjusted cities might be having dinner with their families and friends, or at least watching TV with their kids, you will see a wall of black, punctuated by the odd square of illumination.
Try walking around the wealthiest area of any city, and the patterns will be very different from "normal" areas: Flats will be larger, and someone at home does not necessarily mean the building will look very lit; more people have second homes, or travel a lot, or work late, and so an inhabited flat may still have people at home more rarely. You can easily find rich areas that look almost black even when most houses are occupied.
I don't know if Knightsbridge is an aberration, but I do know London in general does not in fact have a lot of empty properties in proportion to its size/population. I don't have a source handy, but the last time I looked at the stats it was small. More importantly, the vast majority was empty for other reasons than uninterested absentee landlords.
http://www.independent.co.uk/news/uk/politics/tessa-jowell-i...
Consider the many reasons why properties will lay empty, such as for example:
* Owner dies; handling the estate can sometimes take a year.
* Refurbishment can drag out; it's not unusual for large scale building refurbishments to take a year or two.
* Uncertainty over developments; e.g. near me a building of flats stood empty for 2 years or so because it was slated for demolition to make way for new developments that is finally now underway.
When you factor this in, 0.6% minus the "acceptable" reasons simply doesn't leave much room left for any large number of homes to have been left empty for no good reason.
The real scandal is not that there are 22,000 empty homes, but that consecutive governments have left councils in a state that means they don't have the available council flats to find longer term homes for those they are legally required to assist with housing for. They are in temporary housing not because housing can't be found, but because doing so means spending over the "wrong" budgets, and spending too much to replenish council housing that was sold off cheaply starting with Thatcher and that now would cost a fortune to replace because you'd be competing with quite wealthy people willing to stretch far to avoid being displaced further out of the centre of town.
Agreed. Here, for example, is an excellent article about these effects in Portland, Oregon: http://www.invw.org/cash
But yeah, near-zero interest rates right now and borrowing costs being tax-deductible contribute to housing bubbles.
5% is not extra-ordinary, 5% is low. 10% is average and more than that is high.
After paying for property tax and maintenance, anything under 10% is not really worth it unless rent is just a side effect and you are really hoping for appreciation.
I dare you to find me real estate with a 10% gross yield in Belgium for example...
Does Belgium have no property tax? That's the only way such low rents could work.
Round trip transaction cost is sky high though. My experience is that the 21.10% estimated here is a gross underestimate: http://www.globalpropertyguide.com/Europe/Belgium/roundtrip-...
My solution is to protect my family as much as possible while trying to generate enough wealth entrepreneurialy to have a seat at the table.
How do you exactly do it? If you are not yet home owner, it looks like your rents would go up to a point where you are paying 10% of the property price a year. That means in 10 years you will look back and see you sunk all your money in rent while you could have walked out owning it. But at the same time it won't be prudent to buy it right now because you just can't tell how and when current bubble will end. So either way, you don't have good option when wealthy investors are coming together to squeeze you out of a fair home ownership.
Presumably if the penalty for squatting unattended apartments were lower, the owners might be more motivated to find occupants.
Squatting used to be a ~fairly~ normal thing in England, going by impressions from my youth, but this could have been media fear-mongering the middle class with tales of home-invaders, after reading that Wikipedia article[1]. It's a shame that it's a criminal offence now, considering the housing shortfall and rising inequality in the UK.
However, these specific properties/flats would be very difficult to squat anyway, as the buildings are presumably guarded by doormen and at least a few sets of high-security doors.
[1]: https://en.wikipedia.org/wiki/Squatting_in_England_and_Wales
Without any way to counter balance out speculation, land hording, and gentrification/displacement of urban areas, syndicates of real-estate investors would just buy up everything in sight, turn it into luxury condos/lofts and set the price at a rate determined to be some minimum of %75 of the target populations' average income..
Why restrict these taxes only to unused spaces? If you do so, you'll have to get around people only nominally using the spaces.
> Without any way to counter balance out speculation, land hording, and gentrification/displacement of urban areas, syndicates of real-estate investors would just buy up everything in sight, turn it into luxury condos/lofts and set the price at a rate determined to be some minimum of %75 of the target populations' average income..
If only making money was so easy..
To create an incentive for unused spaces to be used, instead of horded.
>If you do so, you'll have to get around people only nominally using the spaces.
Who could pull that off? Someone who owns 4 houses?.. 10 apartment units?
a) stamp duty - sometimes historically avoided by owning property though a cooperation, which is then sold instead of the property directly.
b) council tax - avoided by keeping the property empty of funiture.
A tax crafted in such a way to disincentive hording and speculation would push empty homes and apartments into actual use as living spaces instead of financial siphons.
I get that they speculate on rising prices. But that is still a speculation, so it can go wrong.
And by driving away people, they are probably devaluing their property.
Hording real estate in urban areas inflates prices via intentional limitation on supply.
Do you have any numbers that show the speculation is really what is driving the prices? I doubt that some vacant flat here or there has a significant impact on prices.
If a street was completely vacant, prices would probably go down because it would be unattractive to live there.
London has a chronic lack of affordable housing, and there is no new supply. Worse there is no social renting housing being built either.
Wealthy investors always seem to find a way to foist the losses off on to somebody else.
See what happened to Greece's loans for just one example. They ended up owned by Eurozone governments but they didn't start out that way.
I live in Australia, and there are a lot of "rich" people who made a money off property, just flipping regular houses in our insane market.
All the components of a medium house are reasonably cheap. But then market value comes into play you you add thousands to a sale price. I think the real issue is that a house (basic human need) is being used like any other financial tool. There should be restrictions on the types of investment that uses residential property, to protect people and to allow them to live where they work.
But good luck controlling capitalism, last GFC started because of houses. But nothings really has changed.
Just to add in the Australian context people see property as a way to get rich. the idea of starting business or generating wealth via new ideas, services, technology is sadly not as prevalent as other places.
Muammar al-Gaddafi had an interesting take on this particular issue: page 51 of The Green Book (http://openanthropology.org/libya/gaddafi-green-book.pdf). Newlyweds were given enough money to build a house.
Restrictions on who can invest only bar the people who can't hire a clever lawyer to get around the restrictions.
No matter how late I work, not one window lights up.
This of course assumes the EU economy survives GRExit in any fit state to continue to attract investment.
If you walk through Knightsbridge in the evening, at a time when people in well-adjusted cities might be having dinner with their families and friends, or at least watching TV with their kids, you will see a wall of black, punctuated by the odd square of illumination.