Nevertheless they are not buying houses for emotional reasons, but for the income stream.
FYI, the reason this is happening is that interest rates are so low that people are desperate for yield, and rental yield fits the bill.
There are a lot of benefits:
- professionally managed properties. Most small time landlords are incompetent -- the horror stories you see about landlords being petty or vindictive is from the small time landlord, not the professional manager.
- lower rental prices for properties people want to own. Institutional investors can move funds more quickly to increase rental stock where it is most in demand. Here, too, the yield will fall, which is another way of saying lower rents.
Moreover despite the moral panic by journalists that ordinary households are being priced out, this doesn't actually happen because most institutional investors operate in unconstrained areas, where home prices track construction costs, at most with a small delay. In these areas, an increase in renter demand will result in more property built much more quickly if the institutional investors participate. This actually drives down prices over the long term by increasing supply.
However in constrained areas, this would drive up prices for SFHs. But I thought people weren't supposed to buy SFHs in constrained areas - and institutional investors have been in the multi-unit market for over a century.
Yes, the correlation is not necessarily causation, but we can add some other data points -- for example the size of new construction has been steadily growing at roughly 2%, which does not suggest any kind of odd explosion in house size as a result of the price going up. Of course ultimately, ability to pay determines the price of housing and also house size.
