6

They are different businesses. Developers make more money developing than landlording. Some do both. But they are different businesses entirely. Also, there is a limited supply of capital and carrying that capital has a cost. For example. Let's say Bob the Builder borrows $10M to develop a project. The bank lends on the development. Not the completed ...


5

Suppose you have a product that you can distribute for constant marginal cost $c$. For every $v\geq0$ assume there are some consumers who value the good at $v$. The net welfare created when someone consumes the good is their value minus the cost of production. Thus, if we want to maximise the total social surplus (net of costs), we should give the good to ...


4

Why not hold onto the property, and sell it later at a higher price? Here is a non-exhaustive list of why not: Real estate bubbles going burst. Depreciation and maintenance costs. A location may become less attractive in the long term due to mass emigration, criminal activity going up, collapsed economy, business could relocate to somewhere with incentives....


4

The simple answer is that if it is widely expected that the value of an asset will increase in the future, then the value should rise today as people bid up the price of the asset by trying to get the higher return it can provide. In other words, if an asset is trading at a specific price, the average investor (a term I won't make precise here) should think ...


4

Before applying irrationality to explain the phenomenon, consider the following simplistic model of a rational owner: assume there is the high rent $R^h$ and the low rent $R^{\ell}$. The owner faces the prospect of earning either $$V(h) = \sum_{t=1}^{T_1} \beta^{t-1}R^h + \sum_{t=T_1+1}^{T_2} \beta^{t-1}\cdot 0+ \sum_{t=T_2+1}^{T_3} \beta^{t-1}R^h +...$$ ...


4

The listed price tells you something about the expectations of the vendor and their estate agent. It's a leading indicator, hinting at where the market may be going next. The transaction price tells you something about the actual market during the period of the sale, in the period between the property going on the market and the date of exchange. It ...


4

Some people strongly disagree that LVT is not distortionary: George was right that other taxes may have stronger disincentives, but some economists now recognize that the single land tax is not innocent, either. Site values are created, not intrinsic. Why else would land in Tokyo be worth so much more than land in Mississippi? A tax on the value ...


4

Yes you're correct. Stigler's "Coase Theorem" merely asserts that if transaction costs are zero, then the initial allocation of rights will not affect the total size of the economic pie, but may affect the distribution of the pie. Two examples: Example 1. Profit > Damage. A producer $X$ producing widgets earns \$3 in profits but causes \$1 of ...


3

The New York Stock Exchange has a continued listing requirement of 300 shareholders and 200,000 shares. A company will want to consider whether continuing to be traded on a stock exchange is desirable before approaching these limits. LINK to a NYSE reference document. If a company buys back almost all of its shares the last individual or institutional ...


3

The high-cost area conforming loan limits within the contiguous United States were created by HERA (the Housing and Economic Recovery Act of 2008) and therefore do not exist prior to 2008. For periods prior to the enactment of HERA, just use the historical nationwide conforming limits. There was also a temporary bump to the conforming limits enacted a few ...


3

Two economic models and one returns calculation that can help provide some intuition for this issue and maybe even get to a quantitative evaluation of the problem if anybody finds the right data: Option exercising: The theory of options suggests that you don't exercise a call option whenever the underlying is above the strike price because.... you are ...


2

There are many different models used in this field, depending on the question being asked. For example, commercial and residential properties have very different needs. That said, there is a key model which can be the framework for a broad analysis: The monocentric model The key model in urban economics is the monocentric model, which is a derivation of ...


2

Reviewing their methodology, they make a number of assumptions that will affect their results. They don't provide the sources of the data they use as inputs, so it's impossible to fully evaluate their methodology, but it is worth noting their description: Price to Rent Ratio - is the average cost of ownership divided by the received rent income (if ...


2

Companies can issue new stock (pending board — and regulatory — approval) in “public offerings” and stock buybacks are basically the opposite of this. Typically a company will do this in order to keep their stock price above a certain level. For practical purposes, this simply inflates the voting power of the remaining publicly traded shares &...


1

People buy houses because they want to live in them, and hope the real market price will appreciate. People who buy (or buy shares in) investment properties do so with the expectation to earn a rental income flow, and also hope to choose properties they believe will appreciate in real market price. Developers make money from developing property on land. If ...


1

The general answer would be that it is wasteful and selfish to destroy assets with value. I'm referring to assets as something you own, as property can be confused with land or real estate properties. Still, I tried to list a few motives for destruction of assets Responsible destruction The only cases that come to mind as "responsible" destruction ...


1

Maybe the case of Germany before and after WWI could provide you an example. See here. The short story is that there was a big housing shortage before the WWI, which, after the war, which was no solved by the market, because of rent controls, profits controls, and other regulations. The origin of housing shortage and rising prices: Germany's housing ...


Only top voted, non community-wiki answers of a minimum length are eligible