• Evil_Shrubbery
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    10 months ago

    Taxes absolutely don’t effect market prices in such cases/markets. Because if your are saying that rent taxes would just fall on tenants (basically increasing rent) then landlords are stupid now because they could obviously charge more rent.

    It’s like saying McDonald’s paying employees more would result in pricier burgers - it simply wouldn’t bcs McD is already charging the absolute max it can in given circumstances. It would however lower their profit margin. And still, anything resulting in real profit is still worth doing (that’s why we have McD franchises in Europe too). Or like saying giving a tax exemption to McD would lower the price or burgers - it wouldn’t, price is market determined and not in direct correlation with costs or taxes.

    Where what your are saying is true is in markets with cost-based prices (ie minimal/competitive profit margins). In case of real estate that would mean the majority of rent wound go in repairs or upgrades. Which is not true for the last century, but RE yields are determined and tracked based on rent. So if I want to double my property’s value & have to double the rent. And since people need to live somewhere, they have to pay. If yields are not above market (like 10y local govies), money moves out of RE and into financial markets.