The social protest did not affect returns on income-producing properties in the second half of 2011, which remained at 8-9%, according to a study by the Chief Government Assessor at the Ministry of Justice.
According to the survey by Chief Government Assessor Tal Alderoti, the returns on income-producing properties in the second half of 2011 were about the same as in the first half of the year. The Government Assessors Office does not yet have data for the first half of 2012.
The return on income-producing properties is the ratio between annual income from leasing the properties and their value, represented as a percentage. The potential return is also known as the total capitalization ratio, and is also in making tax assessments for land assets using the income capitalization method.
Return and sales data on 75 income-producing properties, including offices, commercial buildings, industrial buildings, and workshops, were sampled for the period of the survey. Most of the data refer to the total capitalization ratio in assessments made for the purpose of presentation in financial reports of companies, and are based on the ratio between the market figure and the assessment value of comparable properties or of the property being assessed for tax.
The survey found that, in the second half of 2011, the average return on office properties was 8.3%, and that commercial properties had the same return. The average return on industrial properties and workshops was 8.6%. "The survey refers to a period during which the wave of social protest began in the summer of 2011," states the survey. "The effect of this factor, if any, was not yet reflected in the returns seen in the period surveyed."
The survey also found a clear correlation between the proximity of a property to the center of the country, or the center of a town, and the return on the property. "A low return was seen on properties located in central locations, and a high return was seen on peripheral properties," states the survey. "The correlation is apparently due to the higher risk in the periphery associated with components such as the financial soundness of the tenants, occupation rates, and the risks to owners of changes in the environment."
Published by Globes [online], Israel business news - www.globes-online.com - on July 16, 2012
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