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Commercial Property Capitalization Rates.

 
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Etherus



Joined: 27 Dec 2008
Posts: 3

PostPosted: Thu Jan 01, 2009 8:31 am    Post subject: Commercial Property Capitalization Rates. Reply with quote

I am researching the Malaysian property market, particularly the commercial and industrial property and one issue I find absent in the discussions is the Cap rates that affect the property valuation.

(Cap rate being the percentage times that the rental income goes into the property valuation)

Is there any one involved in financing who knows what sort of cap rates I am likely to find in the Penang commercial property market for instance.

What rates are banks looking for? From what I see in looking at a lot of the properties in the market, is that applicable cap rates seem to hover between 15% and 20% which suggests to me the rents are too low or the values are too high.
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randyhow



Joined: 06 Apr 2009
Posts: 1

PostPosted: Mon Apr 06, 2009 4:02 pm    Post subject: Reply with quote

i'm new here... Just a noob question...

Do u mean return %?
(Gross annual rental income) / (Property Value) * 100

In Klang Valley those with >6% is actually good. Don't think u can get anything above 8% in current market. most is around 5%.. but anyway this rate is better than Bank Fix Deposit.

My 1/2 cent.. or no-sense?
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Georgie Shelagh



Joined: 11 May 2009
Posts: 46

PostPosted: Thu Jun 11, 2009 7:15 pm    Post subject: Reply with quote

Since the introduction of service tax on commercial properties in the last couple of years I am in a predicament as to who shares responsibility for the payment of service tax. Going forward my rental agreements pass the responsibilty to the tenant but my dilemma lies with the contracts that do not have the service tax mentioned in them.
Can i still pursue my tenants to pay for this tax?
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clintonbaisley



Joined: 27 Mar 2009
Posts: 31

PostPosted: Sat Jun 13, 2009 2:15 pm    Post subject: Reply with quote

This study develops a model of property market cap rates that draws on the weighted average cost of capital theory and the capital asset pricing model in the finance literature. The model indicates cap rates are determined by debt and equity spreads. The debt spread is the risky debt rate less the risk-free rate, and the equity spread is the return on the market less the risk-free rate. The empirical results support the importance of both spreads; however, cap rates respond with significant adjustment lags to changes in market spreads.
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ysmn



Joined: 19 Sep 2006
Posts: 3486
Location: Where Opportunity meets Ability

PostPosted: Sun Jun 28, 2009 11:03 am    Post subject: Reply with quote

In Malaysia, banks do not value property based on capitalisation rates, but it's used in financial accounting.
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Adelaide02



Joined: 21 Aug 2009
Posts: 1

PostPosted: Fri Aug 21, 2009 7:24 pm    Post subject: Reply with quote

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