Investors Create Global Home Vacancy Crisis
Vacancy statistics in some of the world's major developed cities is dumbfounding.
Paris for instance, has 107,000 homes sitting empty equating to 7.5% of their total number of homes. To deal with the crisis Parisian authorities imposed a 20% tax on the fair market value of rent on these vacant homes. This effort proved to be an insufficient deterrent thus on January 2017 the tax was increased to 60%. This exorbitant tax attempts to mitigate speculation and encourage a more balanced and accessible rental market. It's too soon to know the outcome.
Vancouver recently implemented a similar measure by imposing a 1% tax on the fair market value of vacant homes in their city. However, wily investors are quick to circumventive ways to avoid the tax. They implement creative manoeuvres such as getting someone else other than owner to pay hydro and cable bill hence proving ”occupancy”.
A home vacancy crisis is also occurring other major cities of the world; Sydney (118,499 vacant homes or 7 %), New York (318,831 or 9%) however, to my knowledge, only Paris and Vancouver have taken decisive measures to deal with the absurd imbalance. This phenomenon begs the questions: Are speculators not aware of the paradox they are creating? Or are they just buying and selling amongst themselves with complete disregard for natural market forces? Finally, how sustainable is this form of real estate speculation with its relatively limited market base? These are all legitimate questions as the speculative nature of this phenomenon defies the traditional economic fundamental law of supply and demand.
Here in Vancouver meanwhile stats in early February of this year showed a 25,502 or 8.2%
home vacancy count which is staggering considering the 0.6% rental availability rate in the city. (See my Feb 18, 2017 article “25,502 Unoccupied Homes in Vancouver – That's Crazy!”)
Remarkably cities like Calgary have the opposite problem with headlines like “Calgary Rental Vacancy Rates Hits 25-Year High” according to Canada Mortgage and Housing Corporation (Nov 29, 2016). Clearly, Calgary is not a favoured speculative destination for investors.
These distortions of the real estate market are all premised upon the status quo continuing indefinitely.
It will be fascinating to see what happens when a “blip” in this status quo eventually occurs as it inevitably will.
Partial Source: ZeroHedge, March 7, 2017.
“Vacant Homes Are A Global Epidemic, And Paris Is Fighting It With A 60% Tax”