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Changing Economics Imply New Real Property Investment Relationships
Roulac, Stephen E.
18/3  (Spring 1976): 57-67

This article explores the impacts of the changing economic conditions on financing relationships in real property. The very economic conditions that make new development projects financially unattractive make existing income properties financially attractive. Most simply, new increments of demand exceed current additions to supply, creating mounting demand pressure for higher rents. By way of illustration, new housing starts have recently been at a level of a little more than 1 million units annually, while forecasts of housing demand over the next decade call for annual additions to the housing stock in excess of 2 million units. The gap between annual demand and additions to supply places increasing upward pressure on the price of existing units. It is significant that European families spend approximately 40 percent of their incomes on housing, in contrast to a figure of 20 to 25 percent in the U.S. Further, increases in rents have lagged well behind price hikes for other basic commodities and rents certainly have trailed patterns of rising house prices. There is recent evidence of substantial rent increases in a number of markets and similar trends can be expected to continue.

 

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