REAL ESTATE APPRAISAL AND ECONOMICS
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- Versione italiana
- Academic year
- 2016/2017
- Teacher
- LAURA GABRIELLI
- Credits
- 10
- Didactic period
- Primo Semestre
Training objectives
- The purpose of the course is to provide the student an economic framework within which to explain and understand demand and supply, prices and costs in real estate market. The student verifies that the projects will be conceived within the complex economic relationships of the property market and the construction sector. The course will introduce students to property valuation, and property investment in order to develop an analytical framework by which is possible to make sound real estate investment decisions. Students will learn the concepts, tools, and techniques for valuating plans and projects, based on the application of economic theory.
Knowledge.
- understanding of prices and costs formation in real estate and construction market; understanding of data analysis and processing, using descriptive statistics for data analysis;
- understanding of the main approaches used for property valuation (sales comparison approach, cost approach and income approach);
- understanding of building and land valuation;
- understanding of principles of real estate investment and feasibility analysis during design, construction and management phases;
- basic knowledge of the fundamentals of real estate taxation and the Italian Real Estate Registry.
Skills.
- analysing the characteristics of the real estate investment market to define a project more responsive to the needs of demands and in comparison with the competitive context;
- understanding of the prices and costs formation and employing the appropriate approaches for their calculation; understanding of the factors that determine the land value and real estate value;
- analysing the project within economic relations in real estate and construction market, conduct feasibility analyses of potential real estate projects that measure both the economic and financial benefits of the project;
- valuating the transformations of the built environment; basic understanding of the terms and techniques used to finance real estate projects. Prerequisites
- Are considered acquired knowledge about the construction costs and the Bill of quantities, already studied in Economics for Construction Module (Design and Construction Laboratory 1) and knowledge of the different approaches to the real estate market analysis, introduced in the Economic Valuation of Projects Module (Architectural Design Laboratory IV).
Course programme
- 1. Economics
1.1. Introduction to Economics: prices, demand, supply. 1.2. Consumer behaviour: consumer choice, demand, price, income and cross elasticity of demand. 1.3. Firm behaviour: production function, the law of diminishing returns, cost of production, supply. 1.4 The perfect competition: profit maximization, production decisions, the supply. 1.5. Market equilibrium in perfect competition. 1.6. Imperfect competition markets: the monopoly, the monopoly power, the equilibrium of the monopoly 1.7. Monopolistic competition, oligopoly, the bilateral monopoly. 1.8. The real estate market: demand, supply, players, database 1.9. The construction market: demand, supply, players, database.
2. Real estate valuation
2.1. The principles of the valuation. The direct and indirect approaches. 2.2. International valuation standards. 2.3. Market value: mono-parametric and multi-parametric approaches. 2.4. The frequency distribution. 2.5. The valuation with “merit points”. 2.6. The Market Comparison Approach (MCA). 2.7. The hedonic pricing model with simple and multiple linear regression 2.8. Mathematical finance. 2.9. Theory of interest. Simple interest, discount interest, compound interest. 2.10. Annuities 2.11. Repayment schedule. 2.12 Models with zero growth and constant/periodic growth. 2.13. Income approach: direct and yield capitalization 2.14. Discounted cash flow analysis for market value estimation. 2.15. The cost: synthetic approaches. 2.16. Bill of Quantities. 2.17. The Gantt chart. 2.18. Other approached for cost calculation. 2.19. The residual value. 2.20. and 2.21. Other values.
3. Projects valuation
3.1. Investment decision techniques. 3.2. Rates used in the real estate market. 3.3. Discounted cash flow analysis. 3.4. The feasibility of real estate investments and decision-making techniques. 3.5. The net present value, the internal rate of return, the payback time 3.6. Risk analysis. 3.7. The life cycle cost 3.8. Valuation of public projects and programs. Cost-benefit analysis 3.9. The valuation of historic heritage. 3.10. Multicriteria Analysis. 3.11. Negotiation procedures with multiple criteria, AHP. 3.12. Valuation of projects regarding sustainability and energy efficiency.
4. Professional practice
4.1. The land and building Registry. 4.2. Elements of real estate taxation. Didactic methods
- The course is taught through lectures, class exercises and projects works. The class exercises are called “ex-tempore”, an in-class activity, developed by student divided into groups on a given topic. The project work is developed throughout the course during seminars when students present their results and progress. The project work consists of determining the market value of a real estate asset, chosen by the students. The project work must be carried out in groups of three students.
Learning assessment procedures
- The aim of the final exam is to test the level of understanding of the key concepts and contents of the course. Students are graded in two ways: assignments and exams.
Assignments
- The first assignments are the class exercises explained in the previous sections.
- The second assignment consists in a 20 minutes presentation of the project work, in January. Each student must know the content of the project work of his/her group and can achieve a different assessment of his/her knowledge and presentation skills. The valuation will be based on:
- the completeness of the project work;
- the correctness and consistency of the process used in order to perform the market analysis;
- the ability to justify decisions about the costs / prices / income and the approached used.
Exams
- The written exam consists of a questionnaire with open-ended (exercises) and multiple choice (theory) questions. The test is intended to evaluate the understanding of the topics covered during the course. To pass the test the student must answer 55% of the questions;
- During the oral exam, understanding and critical skills of the topics covered by the course are assessed. To access the oral exam, students must have passed (18/30) the written exam. The oral exam is optional.
The final grade is the sum of the grades of the written and oral exams, the project work and the class exercises. Reference texts
- Gabrielli L., Lami I.M., Lombardi P. (2011), Il valore di mercato: note di lavoro per la stima di un immobile urbano, Celid, Torino.
Realfonzo A. (1994), Teoria e metodo dell’estimo urbano, Nis, Roma.
Roscelli R. (a cura di) (2014), Manuale di Estimo, Valutazioni economiche ed esercizio della professione, Utet, Torino.
