When assessing a property for investment, which factor reflects a high relative risk associated with a low discount rate?

When assessing a property for investment, the relationship between the discount rate and perceived risk is crucial in determining the investment's attractiveness. A low discount rate typically reflects lower expected returns, which often correlates with a perception of lower risk. However, if the investment is considered to have high relative risk despite a low discount rate, it indicates that investors expect significant uncertainty or volatility around the property’s future cash flows.

In this context, a high value property with a low discount rate suggests that while investors expect stable returns, there's still considerable risk involved in the investment. This could stem from various factors like location, market fluctuations, tenant reliability, or potential property management issues.

Thus, when a property has a high value while being associated with a low discount rate, it implies that the market is pricing in some inherent risks—indicating a high relative risk compared to the returns expected. Investors are essentially being rewarded with a lower discount rate for taking on the potential volatility or uncertainty inherent in the investment associated with higher-value properties.