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Macro Measurement and Valuation of the Building Stock

Macro Measurement and Valuation of the Building Stock. ERES 2010 Milan June, 23-25 Jo P. Soeter Delft University of Technology Real Estate & Housing Building Economics. Content. Macro Valuation Capital Formation and Depreciation Expansion and Renewal Development of Building Stock

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Macro Measurement and Valuation of the Building Stock

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  1. Macro Measurement and Valuation of the Building Stock ERES 2010 Milan June, 23-25 Jo P. Soeter Delft University of Technology Real Estate & Housing Building Economics Real Estate and Housing – Peter de Jong 25 June, 2010, 1 of 20

  2. Content • Macro Valuation • Capital Formation and Depreciation • Expansion and Renewal • Development of Building Stock • From Analysis to Forecasting • Sectoral Capital Formation • Measurement of Building Stock • Regional Allocation of Property and Employment Real Estate and Housing – Peter de Jong 25 June, 2010, 2 of 20

  3. Macro Valuation of non-residential Building Stock Traditional approach: Initial Building Stock + Cumulated Gross Fixed Capital Formation - Depreciation = Building Stock per ultimo (in euro’s) Real Estate and Housing – Peter de Jong 25 June, 2010, 3 of 20

  4. Recent approach Dutch Statistics (based upon OECD-recommendations) Gross Fixed Capital Formation = Initial Stock ultimo 1969 + Gross Capital Formation 1969-20... Real Estate and Housing – Peter de Jong 25 June, 2010, 4 of 20

  5. Depreciation is split in 3 components • Disinvestment at the end of the lifetime> Gross Fixed Capital Stock • Loss of productivity during the lifetime> Productive Fixed Capital Stock • Loss of market value during the lifetime> Net Fixed Capital Stock Real Estate and Housing – Peter de Jong 25 June, 2010, 5 of 20

  6. Scientific and planning problem Related to Building Stock Depreciation ≠ Investment for Renewal Net investment ≠ Investment for Expansion Alternative macro approach Investment for Expansion = f(∆GDP) Investment for Renewal = f(building stock) Real Estate and Housing – Peter de Jong 25 June, 2010, 6 of 20

  7. Determination sectoral expansion component

  8. Measurement and Validation indicators for the Building Stock • Measurement based on physical characteristics • Valuation based on market prices • Valuation based on replacement value • Measurement based on accommodating capacity and/or in use Real Estate and Housing – Peter de Jong 25 June, 2010, 13 of 20

  9. Stock in use 2005 535 mln m2 • Available Stock 2005 circa 600 mln m2 • Vacancy and underutilisation circa 100 mln m2

  10. Conclusion (1) After 2000 • growing vacancy and underutilisation of building stock • Recovery of fixed capital formation in buildings after 2005 (favourable financial conditions, economic growth and higher public building activity) • 2010-2025 • Lower trend (based on Upcycling Scenario with max 2% GDP-growth, a more sustainable oriented building activity, more refurbishment and less disinvestment) Real Estate and Housing – Peter de Jong 25 June, 2010, 21 of 20

  11. Conclusion (2) • Flow-stock-trend analysis offers an acceptable base for macro valuation of the stock of buildings and for scenario-linked forecasting of the trend of the sectoralbuilding activity. It compensates the lack of integral statistic observation, measurement and valuation of the non-residential building stock. Real Estate and Housing – Peter de Jong 25 June, 2010, 22 of 20

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