“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