[bluGill]

The investors keeping a building empty don't care about return on investment like most investors do they want to hide assests from their local government and possible have a place to flee to if things get even worse locally.

Investors looking for a return on investment want to rent everything. They leave property empty when remodeling, or when between tenants.

[onlyrealcuzzo]

If property prices are going up 10% per year and price to rent is 30:1 (Vancouver) - to some it's not worth the risk of renting out the property.

You're just banking on leveraged appreciation.

Take a $2M condo. The rent is will be ~$60k for a year. The appreciation will be ~$200k, and the the principal (@ 3% interest - which they have if they're leaving it empty - is $35k).

You're getting an expected $235k if you leave it empty, and $280k (after vacancy and management) if you take on the risk of renting it.

Why go through all the hassle when the government is doing everything they can to pump up prices on leverage?

[lazide]

That depends on cashflow needs, and just how sure someone is that their spreadsheet (and expected future value) will turn out to be true. For property prices to go up 10% yoy credibly, property in that market has to actually change hands after all, and that requires someone spending cash or financing every year do the deal and to produce the data.

If that stops happening, eventually everyone has to adjust their spreadsheets/models, and all the sudden that model gets very grim.

actual cashflow is real/concrete and hence has a momentum and credibility that tends to reduce panic. It gives time to wait out market valuation issues, since there is money to pay the bills coming in.

And once the money changes hands, it also is ‘permanently’ the owners. That reduces risk.

Expected market value? Not so much, on any of those fronts. And at some point, all but the most die hard true believers are going to want to know why they’re dumping cash into finance payments (or keeping cash locked up) for property that isn’t worth it.

At some point with speculation, enough people blink that it collapses.

Or maybe not. At least that is what everyone in that situation tells themselves.

But it isn’t panning out for Chinese firms anymore like it used to.

This takes time to actually happen though, as everyone has very strong incentives to keep wil-e-coyote’ing once they’ve run off the edge of the cliff.

And somehow people always find reasons to not update those spreadsheets when the numbers are going down instead of up. For many of them, they ran off this cliff many years ago.

And it does work, as long as there are enough ‘greater fools’ around, and there are a lot of greater fools, or they can afford to wait.

Boomers here and in China can still go for many years before they have to sell.