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Effect of sustainability on the value of new dwellings and land



Last Updated: 4-2018


The built environment is responsible for 40% of the CO2 emissions in the Netherlands. The government responds by taking measures to make the built environment more sustainable. These measures also affect the construction of new dwellings. These measures are expected to increase the construction costs of dwellings. It is not clear how much these additional costs will be and whether these measures will lead to an increase in value. And because both, the construction costs and the market value of dwellings are the parameters in calculating the land value with the residual method of valuation for land, the following main question has been conducted; What is the effect of sustainability on the economic value of new dwellings and land values? The aim of this research is to obtain insights into the new law and regulations concerning sustainable construction and the consequences for the values and costs of new dwellings. In addition, Gloudemans want to know how these effects on the dwellings may affect the land value. To investigates this, a theoretical framework has been established. After this, a hedonic price analysis is conducted to research the current effect of sustainable measures on dwellings. Hereafter, dept interviews are used to clarify the literature and quantitative analysis, but also to make a vision about the future effects of the new measures. At present, there is a positive effect of sustainable measures on the value of real estate. The future expectation is that non-sustainable dwellings will become less valuable. And due to the massive construction of dwelling which comply with BENG, the costs in the long term will not be as high as currently outlined, namely around €30.000,- additional costs. This means that in the short term, negative effects on the land value will arise when calculating residual, because the construction costs will be higher, while the market value will not be much higher. But after a longer period, the effects will not be that high on land values.

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