Disappointing rental and selling prices

The second alternative to be researched is the case that rental and selling prices will be disappointing. It is essential to research this possibility because in Dutch politics a discussion has started about the height of mortgages. There are two scenarios to be taken into account concerning mortgages. The first economic scenario will be an increase of the interest on mortgage. The second, political, one is that top mortgages, i.e. more than three or four times the yearly income, will not be granted anymore. These two scenarios may have their effects on the selling prices for which the dwellings can be put on the market.

The exogenous variables that give expression to the selling prices of the dwellings, will be lowered by twenty percent compared to the basic numerical model. This will also be done for the rental prices, in case those will fall short of expectations as well. In the basic numerical model the rental prices for apartments was set between € 773 and € 864. In this alternative this will be shifted to € 618 and € 691 for a standard apartment.

The new optimum solution can be found with the following changes of the spatial endogenous variables. The housing programme will have to change in such a way that less standard apartments are going to be realised and more large apartments. In addition to this more offices will have to be realised, namely 4 900 m2. The decrease of parking places is, in this solution, not caused by the functions housing or offices, but by a decrease of the surface area of shops in the passenger terminal (3 200m2 instead of 4300m2). The most relevant outcomes of this new solution are shown in Table 9.2.

In the new solution the likely financial negative effects of lower selling and rental prices is compensated with the revenues of the offices. In such a way that although the investment costs of the project will be higher, caused by an

Table 9.2 Outcomes of disappointing rental and selling prices

Requirements

Basic

New

Change

outcomes

outcomes

Total surface area dwellings (m2)

21 000

21 500

500

Number of standard apartments

9-53

53

46

-7

Number of studio apartments

0

-

0

0

Number of large apartments

41 -165

153

161

8

Number of lofts

2-21

7

7

-

Total surface area offices (m2)

> 30 000

46600

51 500

4 900

Number of parking places

517

504

-13

Investment costs (C million)

146.6

155.7

9.1

Revenues (net present value, C million)

155.9

182.7

26.8

Gross return (%)

5.5-7.5

6.5

7.46

0.96

enlargement of offices, the net present value revenues will be much higher as well. The rental price for offices should be € 182 for this solution, instead of € 153 in the basic model. The new proposed rental price for offices is the maximum allowed, but still within the common solution space.

The conclusion is that the same amount of dwellings can still be realised within the building complex, even if selling and rental prices on the housing market drop.

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Best Investment Tips and Ideas

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