In Austria, where I am from, there’s an average yearly appreciation of property value of 6% (average over the last 25 years, average inflation over the same time was around 3%). Yearly rent is on average 3% of the property value.
So investors have the choice of either taking 6% with no risk and no work or taking 9% but having to service the appartment, having the trouble of satisfying a renter and their legal rights and always having the risk of getting a renter who trashes the apartment and/or doesn’t pay the rent.
And yes, legally a landlord can sue for damages, but if the renter has no money, then all the landlord has is the security deposit, which might be far less than required to cover the damages.
So if you are looking for a super-secure low-risk low-interest investment option, keeping a flat you own empty is a good choice.
A way to counteract this would be a vacancy tax that is as high as the property appreciation. That way, keeping a flat empty nets you 0% ROI, while renting it out nets you 9%. This would disincentivize harmful behaviour (hoarding empty property for investment) while not affecting the behavior we want (renting out property).
The problem is the same in most places.
In Austria, where I am from, there’s an average yearly appreciation of property value of 6% (average over the last 25 years, average inflation over the same time was around 3%). Yearly rent is on average 3% of the property value.
So investors have the choice of either taking 6% with no risk and no work or taking 9% but having to service the appartment, having the trouble of satisfying a renter and their legal rights and always having the risk of getting a renter who trashes the apartment and/or doesn’t pay the rent.
And yes, legally a landlord can sue for damages, but if the renter has no money, then all the landlord has is the security deposit, which might be far less than required to cover the damages.
So if you are looking for a super-secure low-risk low-interest investment option, keeping a flat you own empty is a good choice.
A way to counteract this would be a vacancy tax that is as high as the property appreciation. That way, keeping a flat empty nets you 0% ROI, while renting it out nets you 9%. This would disincentivize harmful behaviour (hoarding empty property for investment) while not affecting the behavior we want (renting out property).
If you have multiple properties the risk of a single tennancies damages exceeding the deposit is manageable.