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  • The influence of increased real estate prices on investment appraisal
    Pšunder, Igor
    According to research feasibility studies and investment appraisal in real estate projects are increasingly performed using discounted cash flow methods and among these by the net present value ... method. However, the payback period is still one of the most popular methods used for feasibility studies and investment appraisal. In the case of the net present value method, one of the key variables is the discount rate. Based on a stable real estate market, the discount rate can be determined by commonly used methods (built-up method, WACC, etc.), but in market conditions, where real estate prices vary widely over time, the earned capital gain (or eventual capital loss) and the increased risk should be considered by determining the discount rate. Analogically, the multiplier in the payback period method also depends on changes in real estate prices. Investors in a rising market are willing to reduce their expectations in terms of rental rate when they expect greater capital gain. Changes in expectations about the rental rate can dramatically influence the multiplier, which is one of the key components in the payback period method. The present article is about considering changes in real estate prices when performing feasibility studies and investment appraisal of real estate projects. The article relies on the market equilibrium model, which explains the relationship between discount rate and capital gain, on theone hand and, between multiplier and capital gain, on the other. The theoretical implications of the article are complemented with a case study.
    Vir: Organization, technology and management in construction [Elektronski vir] : proceedings (5 str.)
    Vrsta gradiva - prispevek na konferenci
    Leto - 2003
    Jezik - angleški
    COBISS.SI-ID - 10697750

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