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Explain what impact, if any, the Covid 19 crisis would have on Capitalization rates.  Would the impact...

Explain what impact, if any, the Covid 19 crisis would have on Capitalization rates.  Would the impact be the same for all property types?

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Answer: Capitalization rate- It is the rate of return, generated on a real estate investment property. This term is used in the real estate industry. This rate is used to estimate the return on investment in real estate market. This is a measure of comparison of relative value of similar real estate investment.

Formula:

Cap rate % = Net operating income/ Current Property value

COVID 19 impact on Capitalization rate- COVID 19 is a Pandemic that has affected world's economies and markets badly. It will impact capitalization rates also because of lower demand in the real estate market. Many people will not get their salaries, many will go jobless. Small companies may shut down, productivity will be affected badly, unemployment rate will increase, people will have less money to spend and create demand so it will impact the prices in real estate market and capitalization rate will come down. People will get either negative return or lower return on the real estate investment.

COVID 19 impact on all types of properties- Yes COVID 19 will have negative impact on commercial and residential properties. This is being called COVID 19 recession. This recession will badly affect the property prices. People are not demanding for property as they are just fulfilling their basic needs. Due to lower demand in the real estate industry, prices will drop in near future.

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