City Councillor – “The main source of profitability in the real estate market is capital appreciation rather than income.”

“The main source of profitability in the real estate market is the line not shown in your pro forma, which is capital appreciation rather than income. This kind of performance is not untypical of real estate companies who embarked on a buy-and-hold strategy.” – North Vancouver City Councillor Guy Heywood, commenting on a rental apartment developers request to waive city fees to save the project [‘Rental developer asks city for $500K in fee help’, North Shore News, 15 July 2011] (hat tip VCI)

Local governments are endorsing a new norm where developers are expected to build rental properties that are not cash-flow profitable, but rather on the premise that strong price appreciation will continue unabated?
Yet another example of ‘new paradigm’ thinking common during speculative manias. – vreaa

6 responses to “City Councillor – “The main source of profitability in the real estate market is capital appreciation rather than income.”

  1. “The bottom line for me is that this is a rental opportunity,” said Coun. Mary Trentadue… “Almost no buildings for purpose-built rental have been built in many years and there’s a reason for that.”

    Yeah. Nonetheless, we_should_not_lose_sight_of_the_fact that taxpayers are subsidizing your attempts to whistle past the graveyard. You can’t make this stuff up. The “bottom line” for Trentadue is… not the bottom line at all.

  2. Following the exact same path like the US did a few years ago.

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