[cycomanic]

> > Houses can sit empty without tenants for years but they’ll only go up.

> Do you have stats for how much of a problem this is? The problem seems to be vacancy rates that are too low, not too high.

No stats on my part, but I have some anecdotal evidence from Australia a couple of years ago. I definitely knew of several apartment complexes which were significantly empty, but advertised rents did not go down. The reasoning behind this was that banks used the previous rent for assessing value (which people used as capital for buying the next property). Because everyone essentially invested based on property price increases not rental income, it made more sense to leave the apartment empty and use the higher capital (based on a previous evaluation) to use for buying the next apartment, than to renting it out and not being able to buy the next property. L

[abigail95]

Australian east coast capital cities are the poster children for low vacancy rates and high prices.

The indicators you need to look for are politicians making it illegal to bid for a rental to obscure prices from market participants.

The percentage of capital gain vs rental income breakdown has been decreasing in Australia since interest rates started dropping 10 years ago.

Now it's going in the other direction, rents will outstrip capital gains because of higher interest - you'll have people saying that landlords are buying up houses and refusing to sell because rents are going up and they are just hoarding cash. You can't win against this argument.

[cudgy]

DR Horton (largest US home builder) is doing something similar right now. Instead of lowering the prices on their homes, they are including incentives by buying down the interest rates on the mortgages of their home buyers. This helps keep the prices of housing higher, which likely allows them to keep borrowing against their inventory, avoid credit calls, and await the Fed to lower rates and return to the good old days.