Question
To reinforce a point that I made earlier in the course, I am not looking for your opinion on the answer to a question. I
To reinforce a point that I made earlier in the course, I am not looking for your opinion on the answer to a question. I am looking for the basis of your opinion. So, please try to convince me.\ \ \ 36 1/ True, False or Uncertain? Justify your response to the following statements.\ \ \ a) Consider the new residential development in north Toronto. A 1300 sq. ft. house was recently sold for $600,000. The houses are designed to not depreciate, their regular maintenance expenses are only $5,000 per year and property taxes in this part of the city are 1 percent. Investors are renting these places to tenants at $50,000 per year. With an interest rate of 7.5 percent and a 50 percent downpayment, the rate of return on the investment would be acceptable if the expected growth rate in prices is high enough. If both the ownership and rental markets are in equilibrium, then we can infer that investors must expect the growth rate in home prices to be more than 2.5 percent per year.
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