The capitalization rate is also called reduction rate and yield rate, which is also an interest rate like the bank interest rate. The latter is the ability to deposit money in the bank to generate interest, that is, the interest rate, while the former is the rate of return brought by investing capital in real estate, which cannot be equated. Capitalization rates are also different from the yields of other industries, because they reflect the profitability of different investment fields. Otherwise, investment will become too simple and simple. Everyone deposits money in the bank to earn interest, which is both worry-free and safe. Theoretically, although market competitors tend to keep the average annual profit rate of various industries consistent, it is not so simple in practice. The application of new technologies, different investment portfolios, different investment fields and investment environments will generate new excess profits. Therefore, the capitalization rate should not be confused with other interest rates (yields), although they may sometimes be equal or similar in quantity.
Related features
1. The capitalization rates of real estate with different uses are different. Under the same conditions, the capitalization rates of commercial, office, residential and industrial buildings should be reduced in turn.
2. The investment risk of real estate is higher than that of national debt. Therefore, even for low-risk industrial buildings, the capitalization rate should be higher than the annual interest rate of national debt.
3. under the same conditions, the longer the income period of real estate, the higher the capitalization rate; The shorter the return period, the lower the capitalization rate.
4. The capitalization rate of real estate and the interest rate of national debt cannot simply compare the income level, because the value of real estate disappears at the end of the income period of real estate, and the principal remains after the maturity of national debt. If the capitalization rate of real estate is compared with the interest rate of national debt, the annual recovery amount of national debt principal should also be considered. Compensation for the risk of conversion rate, tax exemption policy, type, location, year, lease and structure of real estate also affect the capitalization rate, and their influence (relative value) is not difficult to find. Bank interest rate (interest rate on loans and self-owned funds) is the main factor affecting the capitalization rate, but it is also affected by other factors, so the influencing factors of capitalization rate are very complicated and difficult to determine, and cannot be simply replaced by bank interest rate, which requires appraisers to make full use of their own.