Question for tooters who understand the #housing market.
In the past ten years I've seen many tall city-centre buildings in south-east Europe including Istanbul where only the ground floor is kept in repair and let out as shop space, while the floors above are allowed to fall into ruin. Now I read that something similar has happened in Lisbon since a 2012 de-regulation of the urban rental market. 1/2
https://aardvarchaeology.wordpress.com/2013/05/20/urban-decay-in-istanbul/
One of the mechanisms in Lisbon is that "property funds" buy the properties and are not interested in letting them out. Here's my question. What is the economic rationality behind these funds' behaviour? 2/2
@mrundkvist We see similar things here in Venice.
Somebody rich buys an ancient palace, but never goes there. It remains locked up, waiting for prices to rise. Then, some years later, it's sold for a profit.
There's never any intention of using the building. The money is simply parked there, in the hope of a passive return on investment.
@seindal But why does the price rise when nobody is making any money from letting the apartments out? Isn't this like a farmer investing in a tractor, then never using it because he hopes to sell the tractor at a profit ten years later?
@mrundkvist
I think it is simply that the value of the land itself can increase despite there being a decaying house on it, and while there might be better short term ways to manage the building it probably is a lot of work and not that much more profit over just holding 'till the ground itself makes you rich?
@mrundkvist @tobychev You need to work harder on developing your parasitic skillset.
@mrundkvist
Sure, that's why it is important that the other people take care of their buildings as that ensures your land is close to something valuable. Simply being close to something valuable makes land valuable!
I think this is not true in general, but it is definitely true for land. Other more complicated reasons for something being valuable is having been created by a certain person, or having been owned by a certain person (admittedly these are less common in practice).
@seindal
@mrundkvist @tobychev @seindal
In Japan it's common to see lots with paid parking spaces on them - sometimes tiny ones with room for 1-2 cars.
They're owned by a property company that wants to buy the neighboring lots - one large lot is worth more than the sum of the small ones, since you can put up a large office or apartment building there.
They don't want tenants as it's difficult to evict people, and they tear down the house to avoid maintenance. Parking is a short-term way to make money.
@tobychev @mrundkvist @seindal Yep, artificial scarcity by hogging land and not developing / selling until the demand's so intense that the payout's far above the initial cost.
Maybe keeping some of it active just to make enough to pay fees/taxes/skirt some rule.
@Mabande What is this demand rooted in, then? A shared speculation fantasy? We all know what happened to tulip bulbs, and more recently, stamp collecting.
@mrundkvist In part speculation, but also in stuff like population growth and job concentration (which also is a partly artificial factor since a lot of office work can be done remotely). And trends: everyone want to be where the action is, and they'll pay to the bone to be there.
The one with fewer options will just have to travel further to get to their workplace.
@tobychev @seindal To my simple way of thinking, it seems that the only long-term value of city-centre land would be if there is a house on it and people rent homes, shops and offices in it. A vacant lot produces only weeds.