Does the Growing Tendency to Treat Real Estate as "Investment Assets" Hurt the Housing Market?
They are building a new house on the property next to ours.
For many years, the people who own the "main" house on the land — about an acre (+/- 4000 Sq. Meters), all told — had a garage-turned-apartment at one end of the property that they rented out to a local landscaper... who has been a very good neighbor.
Neighborhood sculpture
Now they are building a "luxury" house on that land. We are presuming, at this point, to mostly use as an "airbnb" venue they can rent out for $150 or more a night.
Meanwhile, the landscaper is going to be out of a place to live by May, and he's most likely going to have to move away because it's unlikely he'll be able to find anywhere to live here on a landscaper's income.
Meanwhile, Downtown...
We live in a small city of some 10,000 people. When I first moved here in 2006, the downtown area mostly consisted of storekeepers living upstairs from their shops, and the taller buildings had a variety of apartments.
We have been watching the nature of town slowly change, as largely affordable apartments become fewer and fewer as absentee "investors" buy up more and more buildings, completely gut them, and turn them into "luxury condominiums."
Older downtown building...
Of course, the people who used to live there can no longer afford the rents, and certainly have no hope of qualifying to buy such places.
The word that sometimes gets used is "gentrification," but sometimes I wonder if that's even an appropriate description...
Who is BUYING These Places?
There are actually some serious functional problems with what's happening.
Aside from the fact that the people who actually use and service the town can less and less afford to live here, these "improvements" actually have some problems.
Downtown waterfront buildings...
One of the problems is that the (alleged) target market aren't actually all that thrilled with the modernization. What the more upscale potential buyers really want in these old buildings is improved wiring, plumbing, insulation and more energy efficient windows and such things... what they are getting is huge shiny appliances and media rooms; things that don't really belong in a Victorian-era building in a smaller town.
This, in turn, manifests as "unsold inventory" of $800,000 apartments, which the building owners then see no alternative but to use as more AirBnB's in the interim... thereby removing the properties from both the buyer's market and the renter's market.
Because the demand is high during our May-September tourist season, and the $7,000 a month revenue from renting out the flats as short-term stays is enough to cover overhead... we end up with these buildings sitting basically empty for 6-7 months a year while people are struggling to find places to live.
Another old building being "upgraded"
It's not Just Here...
Of course, this is not a local phenomenon, just here in our town...
It is just as prevalent in large cities around the US and the rest of the world, where giant conglomerates like The Blackstone Group, Inc. will buy up entire city blocks and "upgrade" them for investment purposes.
The "bad" thing about it is that their efforts have little to do with creating housing and a lot to do simply with return-on-investment. But this focus on ROI also is increasingly creating situations where the only people who can afford to live in cities increasingly are the infamous "1%."
What everybody seems to have conveniently forgotten is that the 1% is... well, to be Captain Obvious, here... only one percent of the population, and they only need so many places to live.
Architectural detail
And so, we have this situation in which we have more and more either homeless people or people who have to become long-distance commuters (90 minutes each way, or more) in order to service areas in cities where large chunks of "luxury real estate" sits empty because it's not needed by the people who can actually afford it.
One just has to wonder when that "machinery" is going to grind to a halt, and potentially collapse? Whatever way you look at it, it's certainly not a happy situation for people who actually need places to live and call their homes!
Thanks for reading!
(This creative non-fiction post was written specifically for SteemLEO)
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(As usual, all text and images by the author, unless otherwise credited. This is original content, created expressly for this platform.) Created at 20200122 21:48 PST 1174
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