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How to Increase Property Prices: Name O-Zones
The Opportunity Zone program was put into play to help revitalize low-income/high-poverty areas by funneling financial resources into them. State governments and the U.S. Department of the Treasury designated 8,700 areas nationwide as Opportunity Zones. And, those designated areas have seen an increase in sales prices.
A report from Zillow noted that, compared to low-income tracts that were not selected as, or eligible for, the Opportunity Zone program, properties within the designated areas commanded higher sales prices. Specifically, sales prices on the designated areas increased by more than 20%, year over year, versus the average sales prices that fluctuated between 10%-15%.
The Zillow researchers did acknowledge that, even before the Tax Cuts and Jobs Act was passed (which brought the O-Zone program into being), sales prices for the eligible zones were on the rise. However, “after the tracts . . . actually became Opportunity Zones, their sales prices took off,” the researchers indicated.
Still, the analysts did caution that the metrics focused on “very early signals of how the tax breaks may correspond to real estate trends.” It’s not certain if the Opportunity Zone uptick is a flash in the plan, or part of a larger trends. Furthermore, big money has yet to start pouring into the zones, with many of the funds still on the sidelines until guidance becomes clearer.
Still, if the big money is ready to come into these zones, “signals we see in transaction data now might be drowned out in the coming months, if waves of new capital begin pouring in,” the Zillow analysts observed.
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- ◦Sale/Acquisition
