Property, Credit Crunch and Investment – Part III

To analyze the development we start from the net rent, obtained from comparables, and the realized sale’s value. Given the risk premium, which for simplicity we assume to be the same for the residential and commercial part, we find a corresponding opportunity cost of 4% reflecting the tight condition of the mortgage market. Since inflation in the last 10 years averaged 2%, the 6% construction loan less inflation and opportunity cost calculate a 0% lender development premium. Thus, we can conclude that the financial costs (more…)

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