The Biden tax plan could have a chilling effect on sales of appreciated real estate, thereby reducing supply, and increasing the value of properties held by those willing to sell and take the tax hit.
#2 Relative Availability of Investment Capital On a positive note, the Federal Reserve has been pumping money into the banking system for a dozen years with much of that capital still sitting on the sidelines. It is difficult to see why the supply/demand ratio for investing in apartment communities would swing dramatically in the near future. Moreover, the Biden tax plan could have a chilling effect on sales of appreciated real estate, thereby reducing supply, and increasing the value of properties held by those willing to sell and take the tax hit.
the supply balance. Major tax law changes could alter overall investor appetite for domestic real estate. Extraordinary or sustained actions by the Fed to tighten money eventually could soften demand for income- producing real estate like apartments. After three years of apartment spreads at or below 350 bps, we may be due for an increase. #3 Perceived Risks Associated with Apartments For a given class of apartments in a particular neighborhood, there are some key uncertainties that can drive the “risk premium” that contributes to the spread.
uncertainties within a narrow range, the risk premium is low. On the
other hand, when investors cannot
Uncertainties that contribute to the spread: Supply risk Vacancy risk Operational expense inflation Taxation risk Regulatory risk Functional obsolescence 1. 2. 3. 4. 5. 6.
Conversely, rapid overbuilding could disrupt
When investors feel they can forecast such
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