The value of an apartment is based on many things, like for example size, location, status etc. etc. and possible rent income.
So if a person wants to buy an apartment for investment I.e. not as primary residency, the past rent is an important factor.
So if an apartment based on price/value and current accepted % return should have a rent of 20.000NTD per month. If the owner rents it out for just 16.000NTD then the perceived value of the apartment goes down… So the owner might decide it is better financially to keep the apartment empty instead of renting it out at a discount.
That is a huge reason why so many apartments in Taipei are empty, and why the landlords are so stubborn when negotiating rents.
Of course they do. They operate their property just like slum lords do in the US because rent is so low compared to the supposed value. It makes no economic sense to try to fix these old apartments. It can cost NT$1 million to properly restore an apartment and the repairs might not be able to completely fix the leaks, which are the root of most problems. If I rented the apartmet for NT$30k per month, it would take at least three years to recover my investment. Why bother?
In most cases, rental income at a new place is not a factor. Investors are mainly interested in the capital gain, not rental income. I can flip the apartment for more if noone has ever lived in it.
Rental income is always an issue if buying for investment. You never lower the rent as it reduces the value of the property, better keep it empty as then value will not be impacted
I don’t think that’s the way it works in Taiwan unless you are investing in commercial real estate or student housing or illegal short-term rentals.
Here’s a real example. Landlord owns old apartment (40 ping) inTaipei. Apartment could be sold for NT$35 million. She charges NT$45,000/month in rent. This is pretty high for a 40 year old building with no elevator or parking.
Her gross annual yield is just 1.54%. She maintain the apartment well so there are costs. She should probably just sell the apartment and put the money in government bonds. She’d come out ahead with less risk.
She won’t do that because she is waiting for even more capital gains when the price goes up as it has always done.
Also, buyers will not know whether she has raised or lowered the rent.
And I have never ever heard of a Taipei landlord lowering rent on a residential apartment. They’d rather leave the apartment empty than lower the rent. In my experience, they are pretty good about not raising the rent for many years if you are a good tenant.
OK, I understand that you are talking about a real investor. In my experience, most buyers of residential property are not that sophisticated. I suppose that’s why sophisticated investors can do so well
I meant that I do not think the reason they will not lower the rent is because they are worried about decreasing value. They won’t lower the rent because of money illusions and sticky prices. Especially the latter.
It was actually a comment on why there are so many empty apartments in Taipei City. Too many property speculations, where they want a high rent to not reduce the value of the property, too high rent so nobody wants to rent.
Of course there are different reasons, not 100% is the same but I am talking about what I see a lot of
What makes people un equal, there are nice parts of Hsinchu then Older parts of town look poor and traffic is bad., makes people feel unequal. You go another part of town, looks nice. Need to renovate older areas, see video
Here in Southern Taiwan, some areas touched up with green
I’d say rents still matter for investors, at least some of them. If they took out a mortgage as investors often do, they generally want the rent to cover the interest part of the loan or more. Though you are right that it’s not uncommon that brand new units are left vacant for a few years then get sold. Especially when prices go up rapidly, the appreciation is much more than their potential rental income, in which case the owners won’t bother renting.
