More rental than owner occupied dwellings

The real estate developer of the project believes that the current market situation demands for 25% of the dwellings in the rental sector and 75% in the owner occupied sector. This ratio may have to be changed if the demand for rental dwellings increases, for instance if the interest on mortgages cannot be fully deducted from income tax anymore. The growing popularity of new rental constructions, such as renting the casco and buying the interior, also have to be taken into account. In this alternative we will study the case that 75% of the dwellings will be in the rental sector and that after 15 years 75% of these rental dwellings will be sold. It is important to incorporate the sale of dwellings in fifteen years time in this study, because that may happen in case interest rates are currently high and will be much lower in fifteen years time. Another reason to let the dwellings and sell them at a later stage, is that during the construction period of the area it is unattractive to invest in a dwelling in such an area. Finally, the investor may not want to have a large cashflow at once, but wish to spread it over a longer period.

The ratio of 75% to 25% for owner occupied to rental will be changed in the exogenous variables to 25% to 75% and we assume that 75% of the rental dwellings will be sold after 15 years of exploitation.

Table 9.3 Outcomes of changing the ratio between rental and owner occupied dwellings

Requirements

Basic outcomes

New outcomes

Change

Total surface area dwellings (m2)

21 000

21 400

300

Number of standard apartments

9-53

53

53

0

Number of studio apartments

0

-

-

-

Number of large apartments

41 -165

153

153

0

Number of lofts

2-21

7

7

0

Total surface area offices (m2)

>30 000

46600

42 000

- 4600

Number of parking places

517

475

-42

Investment costs (C million)

146.6

137.4

-9.2

Revenues (net present value, C million)

155.9

137.4

-18.5

Gross return (%)

5.5-7.5

6.5

6.49

-0.01

Table 9.4 Outcomes prices alternative 3 (C)

Basic

Alternative 3

Offices

- rental

336

325

Apartment standard

- rental

636

591

Apartment large

- rental

773

727

- sale

200 000

181 818

Loft

- rental

1 091

1 045

- sale

263 636

254 545

The consequences for the optimum solution are marginal for the housing programme, as shown in Table 9.3.

The amount of square metres of office space will decrease and the financial results of the project will drop to zero. This outcome can be explained by the fact that changes in rental and selling prices will take place in this solution, namely a fall of the prices of the dwellings as shown in Table 9.4.

The housing programme remains the same in this alternative solution, but the net present value revenues of housing will change, due to the fact that 75% of the rental dwellings will be sold after 15 years. This will be compared to the outcomes of the basic model in the Table 9.5.

The comparison shows us that with the same housing programme, but more rental dwellings than owner-occupied dwellings during the first fifteen years of exploitation and lower prices, the total net present value revenues of housing can be approximately the same.

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