Real estate markets are lucrative. Money invested in this market compounds at a range of 2-30 percentage points higher than bonds and bills. Real estate’s safety as an investment can only be likened to that of rare commodities. This safety coupled with an amazing return rate makes Real estate an interesting venture.
Presence of Casinos in an area is a variable that affects real estate values. Brick and Mortar casinos can either transform a municipal area as or depress the local real estate market. Hence, as an investor, it would be prudent to understand its effects.
However, like every other variable, when understood, it can lead to profits. The market is littered with real estate fruits ripe for picking. But first a knowledge of Canada casinos and their locations is required. Learn more below.
Effects of Physical Casinos
The positive effects are numerous and vary in nature. Some of them affect the markets directly, while others act indirectly.
Gentrification
Gentrification is described as the improvement of a district, area or house to conform to middle class standards. Gentrification has its supporters as well as a those who oppose it. The Naysayers present an argument that the process is only meant to displace the poor in the community.
This however is a fallacy as the positive effects of gentrification to a low-income household are numerous.
Increase In Real Estate Prices
An increase in local real estate prices is a positive effect of gentrification. The local property prices in rural counties with low population increase when physical casinos are established. This phenomenon has been noticed in areas where county sizes are large.
Prices of Medium homes are two percent higher in counties with casinos as opposed to counties without. Michael Wenz, a researcher, established that casinos’ effects on real estate is inversely proportional to the population. This is best felt where the area is generally dormant. Day tippers coming to this casino leave money. In urban centers, there is no noticeable effects in real estate prices.
Increase in Rental Prices.
Casinos attract a flurry of tourists who need accommodation. Hotels handle this. However, the gig economy has changed the hospitality industry. Applications like Airbnb enables the conversion of a home into a rental space. This earns passive income.
Increase of people in a town is beneficial to realtors who focus on rent. If Labor is sourced outside the area, more residentials rise up to supply the demand for homes. Existing prices also shoot up especially in areas where no further infrastructure can be developed.
Economic Impact in the Local Community
There are numerous economic benefits of physical casinos.
Increase in Tax for Local Authorities.
The increase of local revenues greatly depends on whether the casino acts as a tourist attraction or a restaurant. Focus is now brought to the casinos business model. Is the casino tailored on serving locals, or does it target tourists from other areas. When a casino serves the latter, government tax and the local economy greatly improve.
Workers are sourced from the locals. They pay taxes and levies to the local municipal. Tourists visiting buy from the area residents creating a chain of employment opportunities. Nearby hotels spring up due to demand for accommodation. All these businesses help fund the local government.
The casinos themselves however pay taxes directly to the government. This does not stop the local government from making them acquire special licenses and permits increasing income.
Employment in the Area
Flow of payments from the casino to its environs matters. When the casino serves players other than the locals it creates a regional circulation of money and a subsequent increase in purchasing power. This has a multiplying effect on employment.
When a significant portion of a casinos patronage is based away from home, it has a positive impact. The effect is directly correlated to the number of visitors. An increase without a displacement of the existing economic activity, leads to jobs.
The nature and number of jobs created is an issue. When the establishment is large and draws on local talent for management opportunities, effects occur. The ripple effects of drawing from local talent is felt in the area. This leads to positive adjustments in sectors like hospitality and retail trade. The increase in purchase power fuels demand for better housing
Negative Effects
Physical casinos have negative effects on the real estate market. Though not as profound as the positive ones, the effects cannot be ignored when looking at the market.
Lower Home Values
In urban centers, home values close to established casinos report a low figure. A drop ranging from 2% to 10% is expected for home values in these areas. This leads experts to brand casinos as “an attractive nuisance, a nuisance on home values.”
Brick and Mortar casinos cause externalities like noise and disturbing lightshows in a bid to attract customers, traffic and congestion when the casino successful and increased crime rate and substance abuse. These externalizes impact the real estate market, with buyers avoiding places near the casinos. This however is case and site specific despite consensus showing generally negative prices near these establishments.
The spacing of casinos also affects home values. If the casinos are saturated in an area, the value of homes plummet. A case study of the above is Springfield Massachusetts. Crime levels also increase. This makes homes unattractive for buyers.
Lack of Stability
A local economy should not be solely dependent on brick-and-Mortar casinos. Casinos are inherently unstable and a risky investment. Casinos require heavy upfront investment and constant improvement that causes strain to its financial health. Such strains if not adequately handled leads to many casinos closing. This is attributed to the lack of innovation in the physical gambling industry.
The covid -19 pandemic showed how vulnerable the system is. Many casinos closed permanently while a few conducted staff layoffs to remain afloat. The lack of stability is a factor to look at when investing in nearby real estate.
Whether the Casino is sustainable and its capacity to weather storms should be a viewing point before investing. The rate of return if the casino is closed should be considered when purchasing.
Conclusion
Casinos can make and break local economies. Profiting from them needs an understanding of its variables and the effects. They then can be tailored to ensure that the realtor benefits. A keen eye and attention to detail is essential in analyzing these externalities. Many people have profited from this approach to investing in real estate and it should be considered.
