Salloum wroteJackB wroteSalloum wroteDon't buy a taxi license. Eventually the government will start reissuing plates themselves and the value will be almost nil for existing plates. Not to mention the fluctuating prices right now, anywhere between 22000-35000$. I'd never invest in anything that doesn't have some sort of face value, at least.
What makes something with a face value a more attractive investment? I don't see any reason why it should be (I'd actually argue the opposite)
Those taxi licenses were free (just taxes and fees) at one point. The only reason they are this expensive now is because the gov't is not issuing new ones for a long while now. Its not about having a face value per se, but I'd never invest in something that could worth nil tomorrow (because that's what it's truly worth. It's a plate number at the end of the day)
I don't agree at all.
The value of any asset is calculated by discounting its future cash flows. Taxi plate numbers are no different since they are means to generate cash. Theoretically speaking, the value of the next taxi plate number being offered in the market should be equal to the average discounted cash flows one would get from operating as a taxi driver, minus the minimum discounted cash flow that an illegible person is currently generating (or call it opportunity cost - which in this case I'm sure is zero since unemployment is very high in our beloved country). This is where the $30,000 current market price is probably coming from. If someone is willing to pay $30,000 for a taxi plate number today, it just means that the NPV of whatever he's making now (his opportunity cost) is at least $30,000 less than the NPV he'll be making as a taxi driver (I'm sure not everyone does the math before buying a taxi plate number, but at the back of their head, this is the trade-off bidders are trying to calculate).
Regarding your point of government issuing more plate numbers. I'm sure this will decrease the price of current plate numbers in the market (the price drop would heavily depend on how many new plates will be issued). But the price will never drop to zero (not even close). Bare in mind that the supply of such plate numbers is regulated for a reason. The government wants to protect the cash flow current taxi drivers are generating, and this is why we don't see them issuing new plate numbers.
Interestingly enough, I think taxi plate numbers can only go up in value (at least in the long term), and are immune to economic conditions. Here's why:
1- If the economy is good, more and more people would want to use taxi as a transportation means. Since supply of taxis is limited, to accommodate demand the price per trip will go up. If the price per trip goes up, the NPV of operating as a taxi driver will go up, therefore increasing plate number prices.
2- If the economy is bad, more and more people will lose their jobs. The more people losing their jobs the more the demand for taxi plate numbers (as the next bidder will always have an opportunity cost of zero). Higher demand will increase plate number prices - off-course in this scenario there will be other forces in play that will be pulling the price downward. Because more unemployment means less people using taxi for transportation, but this effect in my view is small since taxis are already very cheap in Lebanon (because "service" prices are regulated by the government)
The only risk is new and better means of transportation emerging in the market, such as metro stations (which will significantly decrease demand for taxis). But in a country like Lebanon, I doubt this is happening anytime soon.
Sorry for the long post :)