RENTAL INCOME AND CAP RATES: A COMPARISON OF THE LISBON AND PORTO HOUSING MARKETS
RENTAL INCOME AND CAP RATES: A COMPARISON OF THE LISBON AND PORTO HOUSING MARKETS
Author(s): Antonio Carrizo Moreira, Fernando O. Tavares, Elisabeth T. PereiraSubject(s): Supranational / Global Economy, Labor relations, Rural and urban sociology, Transformation Period (1990 - 2010), Financial Markets, Socio-Economic Research
Published by: Editura Universitară
Keywords: real estate appraisal; income approach; cap rates; real estate investor; cluster analysis; Lisbon; Porto;
Summary/Abstract: The goal of this article is to analyse the relationship between rental income and capitalisation rates when real estate value is assessed in parishes of the Lisbon and Porto municipalities. Based on housing market values in euros per square metre during the 2006-2009 period, the income approach was used to compare the two main types of apartments (i.e. B2, or two-bedroom, and B1, or one-bedroom) in Lisbon and Porto. We used the capital asset pricing model to calculate the risk measure. The cluster analysis was used to group the Lisbon and Porto parishes according to their rental income and capitalisation rates. Regressions were used to model both geographical markets. Clear differences were found between Porto and Lisbon, the results being more robust for the Porto municipality in regard to B2 apartments. Moreover, rental income is inversely proportional to capitalisation rates for B1 apartments for Porto parishes, which means that there is an initial overinvestment.
Journal: Journal of Urban and Regional Analysis
- Issue Year: 8/2016
- Issue No: 2
- Page Range: 179-202
- Page Count: 24
- Language: English