Hi All
I have noticed a few comments on this forum (and in books that I've read) that commercial property experiences lower CG than residential. Does this generally hold true, or is it just a myth?
Yardney mentions in his book that commercial properties are simply valued on their yield and I think he uses this to explain their lower CG. I just can't get this to work for me; using real data of course. I'm not exactly using a sample size that adequately represents the whole market, but nonetheless, the logic doesn't seem to work for me either.
Essentially, this says that a residential worth $500k will appreciate quicker than a commercial worth $500k. Are there any examples of this?
I understand that residential and commercial work on different cycles. I'm having a guess here, but one is probably based on spending and the other on affordability and interest rates. But the most obvious outcome would be that residential would overtake commercial. That would also then mean that residential would start to produce greater yields than commercial (eventually).
The only experience I have is with a residential IP and two commercial IPs in the same area. Without any doubt, the commercials have appreciated possibly 20% more than the residential while returning much higher yields.
Any thoughts would be greatly appreciated as this has me torn at the moment.
Many thanks
Todd
I have noticed a few comments on this forum (and in books that I've read) that commercial property experiences lower CG than residential. Does this generally hold true, or is it just a myth?
Yardney mentions in his book that commercial properties are simply valued on their yield and I think he uses this to explain their lower CG. I just can't get this to work for me; using real data of course. I'm not exactly using a sample size that adequately represents the whole market, but nonetheless, the logic doesn't seem to work for me either.
Essentially, this says that a residential worth $500k will appreciate quicker than a commercial worth $500k. Are there any examples of this?
I understand that residential and commercial work on different cycles. I'm having a guess here, but one is probably based on spending and the other on affordability and interest rates. But the most obvious outcome would be that residential would overtake commercial. That would also then mean that residential would start to produce greater yields than commercial (eventually).
The only experience I have is with a residential IP and two commercial IPs in the same area. Without any doubt, the commercials have appreciated possibly 20% more than the residential while returning much higher yields.
Any thoughts would be greatly appreciated as this has me torn at the moment.
Many thanks
Todd
