Not if the investors are willing to warehouse units to keep prices high, rather than lower prices in order to sell. If prices of luxury units are high enough, you're talking a significant percentage of units that can just be held while investors still break even or profit. Why lock in a loss or low profit (and, in doing so, hurt the value of your other holdings)?
>Not if the investors are willing to warehouse units to keep prices high, rather than lower prices in order to sell.
Source this is happening?
>Why lock in a loss or low profit (and, in doing so, hurt the value of your other holdings)?
Because you have to pay upkeep on those units so they don't fall apart, and repay the bonds you raised to build those luxury condos in the first place?
>Because you have to pay upkeep on those units so they don't fall apart, and repay the bonds you raised to build those luxury condos in the first place?
If you raise rates on the buyers that do exist, you can cover these expenses.
"Not if the investors are willing to warehouse units to keep prices high, rather than lower prices in order to sell."
Their claim:
"If it costs more to maintain a unit — and keep it in compliance with housing codes — than rental income justifies, it only makes sense to padlock it.
In other words, an anti-warehousing law would force owners to lose money every month — or rent a substandard unit at the risk of being in violation of housing laws."
Those aren't exactly the same thing. You're talking about developers/owners refusing to sell a luxury condo, whereas the "conservative think-tank" is talking about landlord refusing to rent a unit below his costs. Besides the difference between selling a unit vs renting it out, there's a huge gap in the middle between "minimum cost to the landlord of having a tenant" and "whatever the market rate for rent is". Even if we assume whatever the "conservative think-tank" said is true, it doesn't apply above that lower bound.
>If you raise rates on the buyers that do exist, you can cover these expenses.
Are you talking about renters or buyers? Your usage of "rates" imply that you're talking about renting, but "buyers" implies you're talking about buying.
I don't assume that what they say is true; in fact, I think that they're wrong. It was an example of even the people in whose interests it is to deny that warehousing happens, not denying that it happens.
As for the difference between renting and selling, luxury and non-luxury, apparently "supply is supply", so it doesn't matter in the aggregate. The details kind of don't matter, because at market scale, some factor should make "move it or lose it" on empty units the norm. Homes are to live in; if you're not filling them with people who are living in them, something has failed, socioeconomically. It used to be a matter of taking a lower profit in the interests of community stability and vibrancy (which a local landlord or seller would want; many aren't local), but now that everything is hyper-efficient, perhaps the cost of holding unproductive property isn't high enough.
>I don't assume that what they say is true; in fact, I think that they're wrong. It was an example of even the people in whose interests it is to deny that warehousing happens, not denying that it happens.
They're saying that happens, but only in a very specific case that doesn't apply to the claim that you're making. Claiming that developers/owners are "warehousing" units, because owners don't rent out their units for less than it costs to them, is a non-sequitur.
There was a point when they claimed it wasn't happening at all (as you are). When that became untenable, they switched to, "It's good, actually." We are at the "Big Tobacco funding medical studies" step of the process.
We are also at the point where I question what your interests are in prolonging this conversation. Mine are that I'm a renter whose finances have been damaged by the uncontrolled increases in rent caused by unscrupulous property owners, and a Millennial who can't escape to home ownership because of the inflation of the prices of properties for sale. Being clear about why I've been forced into this position is important to me. And you?
Warehousing can work to an extent, but eventually there is enough supply to overpower it. Again, the answer is to just keep building. There's also very little evidence that it is happening. NYC has vacancy rates below 3%, its extremely difficult to get much lower than that.
I'll be happy to see when it does. We're not there. And, anyway, a break of that strategy probably means that inventory gets flooded to the point that you needn't have overbuilt at all.
