[tarsinge]

Because the root cause is not always high demand, it’s also speculation. Real Estate is now cool again (just look at investing forums or subreddits), and foreign investor money is flowing.

Look for example at Portland (OR) how the rent increase correlates with the population increase. The current urban hype alone can not explain these numbers.

Also another example since a few years a lot of high earning people in Paris are actively moving to cities with a better quality of life and climate (like Nantes, Bordeaux), in fact as high than 80% would do it if they could [1]. Yet bizarrely this has absolutely no impact on the market.

[1] https://www.lepoint.fr/dossiers/economie/bac8-saut-secteur-p...

[candybar]

This doesn't make any sense - real estate speculation would increase the purchase price of real estate but cannot directly impact rental rates. Speculation means people are bidding up prices for real estate beyond what's supportable by current demand, based on expected future demand. This generally doesn't make sense in the rental market - as a tenant, you're not entitled to benefit from any future increase in demand and it doesn't make sense to pay more that what the rental is worth to you now. This means rents, in aggregate, are a relatively accurate measure of the current supply and demand, free of speculative intents.

Ironically, certain types of rent control laws could lead to the rental market being influenced by speculation. Rent control laws effectively turn tenants into partial owners - this means, depending on the law, it may make sense to rent at an above-market rate, if that allows you to keep renting the same unit at what would later be a below-market rate. Likewise, from the landlord's perspective, it may not make sense to rent even at a market rate, because to do so may lock you out of getting what would be a higher market rate in the future.

[xg15]

> This doesn't make any sense - real estate speculation would increase the purchase price of real estate but cannot directly impact rental rates.

Not an expert, but seems to me they could indirectly, by reducing supply of rentable apartments:

Consider district X with n rentable apartments located in m buildings.

Now some buildings get vacated and are kept empty by speculators.

The apartments from those houses are not anymore available for rent, however, the demand for rentable apartments stays the same - therefore landlords of the remaining apartments now have leeway to raise rent without being punished by the market.

[candybar]

This doesn't have much to do with speculation - the decision to rent or not is something that every owner can make and the economics of the decision don't depend on whether your investment was based on price speculation.

Generally speaking, wherever you have a strong rental market, vacancy is low - it doesn't make sense to keep units vacant in a strong rental market. Speculators aren't some magical creatures to whom normal rules don't apply - real estate speculators are merely investors who believe that prices will move in their favor in the future. That doesn't mean they are any more incentivized to forego rental income, which generally is a large component of the return on any real estate investment.

Edit: I'll add that if you go by classical economics, you'd predict rent to go down if price speculation is excessive, since builders respond to real estate price and if price is sufficiently above cost of construction, this leads to construction of more units, which increases supply and depresses rent.

My general understanding is that this doesn't necessarily work that way because the fundamental factors behind what makes a location attractive don't change - within reason, if you build more, in the long run, you just become a larger, denser version of what you were, which just attracts more people.

[camgunz]

I would give you 10 upvotes if I could. The main reason for rent (and housing prices in general) increases is speculation and investment. There is billions of dollars in rentals and mortgages, and it's in everyone's interest that real estate worth goes up... unless you're trying to rent an apartment or buy a house.

Someone pretty smart once said you can't have both real estate as an infinitely increasing source of wealth _and_ affordable housing at the same time. You only get to pick one.