Saturday, October 21, 2006

Ottawa Price to Rent Ratio

"Price to Rent ratio" or "Price to Earnings (P/E) Ratio"
Higher price increase expectation makes people willing to pay higher price for given rent level.

P / E = 1 / [ (i + t + d) – E(P) ]

E: rent, i: interest rate, t: property tax, d: depreciation,
E(P): the expected capital gain for the property.


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