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Capitalization rate (or "cap rate") is a real estate valuation measure used to compare different real estate investments. Although there are many variations, the cap rate is generally calculated as the ratio between the annual rental income produced by a real estate asset to its current market value. Most variations depend on the definition of ...
When interest rates are low, investors and savers cannot make easy returns using low-risk methods such as government bonds or savings accounts. To still get a return on their money, investors instead have to buy up other assets such as stocks and real estate, thereby bidding up the price and creating asset price inflation.
A real-estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets, and it typically follows a land boom or reduce interest rates. [1]
If demand is low, this leads to lower house prices and less construction of new homes. Glaeser and Gyourko (2005) [ 13 ] point out that the housing market is characterized by a kinked supply curve that is highly elastic when prices are at or above construction costs.
In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". [1] It is used to evaluate new projects of a company.
The costs include search costs, real estate fees, moving costs, legal fees, land transfer taxes, and deed registration fees. Transaction costs for the seller typically range between 1.5% and 6% of the purchase price. In some countries in continental Europe, transaction costs for both buyer and seller can range between 15% and 20%. Long time delays.
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