|
Abstract:
In Taiwan, the term “public
housing” is also called “social housing” and the residential market is facing
problems of high housing prices, high vacancy rates, and insufficient
transparency in the leasing market. Since 2011, the government has promoted a
policy of renting and not selling social housing, and through related plans, it
has assisted socio-economically disadvantaged households to rent housing. Real options theory (ROT)
originated in 1977, Real option valuation model (ROV) has been utilized in a
variety of real estate development decision, from planning to operations and
from operations to abandonment. This study takes the four social
housing cases of A, B, C and D (three of which have been constructed) currently
open for rent in Taichung City as examples, uses the net present value (NPV)
and ROV methods to evaluate the benefits of investing in real estate. Through
the embedded real options adopted at decision making stage and the
Black-Scholes model modified with value leakage, this study using the geometric
Brownian motion to calculate the corresponding option premium (OP). Adding OP
and passive NPV together, the expanded net present value (ENPV) is obtained as
the investment value of a privately-owned social housing project. Both the
development model and valuation model proposed in this study have been verified
in the aforementioned four social housings. The net present value of these four
places is negative, and the ENPV of three of them will be positive after a
one-year deferral of development. Finally, through sensitivity analysis, it is
found that the average rent increase rate of social housing is the most
influential indicator affecting the fluctuation of the ENPV. Taking case A as
an example, when the average rent drops by less than 3%, the ENPV will become
negative. The second largest influencing indicator is the interest rate of loan
funds. Taking case A as an example, when it increases by about 5%, the ENPV
will become negative. To put the idea of
privately-owned social housing projects into practice, a project financing mode
titled BOO (Build-Own-Operate) is employed in this study, and the proposed
valuation model can objectively and comprehensively value a privately-owned
social housing projects.
|
