Measuring the effects of borrowing on property investments

Patrick Rowland (Department of Property Studies, Curtin University of Technology, Perth, Western Australia)

Journal of Property Finance

ISSN: 0958-868X

Publication date: 1 December 1996


Investors commonly use debt finance in the purchase of income‐producing properties with the aim of enhancing their return on equity. Describes how the past effects of borrowing can be assessed from property returns and loan interest rates in recent years. Methods for measuring the past consequences of financial leverage are considered and tested. Based on data from the residential property market in Perth, Western Australia between 1982 and 1994, borrowing at a variable interest rate would have shown a modest increase in return and added considerably to the volatility or risk. The impact of inflation and taxation on the benefits and risks of financial leverage is also assessed.



Rowland, P. (1996), "Measuring the effects of borrowing on property investments", Journal of Property Finance, Vol. 7 No. 4, pp. 98-110.

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Copyright © 1996, MCB UP Limited

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