Værdiansættelse af investeringsejendomme

Hanne Degn & Line Birch Jensen

Student thesis: Diploma thesis


We have reviewed the issues rised by valuation of investment property when you, as an investor, are considering whether it is desirable to invest in commercial properties. The overall market in Denmark has suffered during the financial crisis and this has caused a spillover effect on the Danish property market, including the price of investment properties and number of trades during the period. There are two models that can be used to make a valuation of investment properties, the return based method and the DCF model. We have used the DCF model for the final valuation of investment properties, as it takes into account the future cash flow for the property and generally takes into account the future, thus we get the most accurate property values. We need the investor's return requirements to make the valuation. This we calculate from the CAPM, the risk-free rate and risk addition. We compare the return requirement with the investment's WACC, the weighted average cost of capital. WACC thus takes into account, that the financing of an investment are made at different costs - the cost of mortgaging is cheaper than the portion which is financed by equity. The return requirement calculated using the CAPM should be higher than the financed WACC, otherwise it will not be desirable for the investor to invest in investment property. We have calculated property values both in the yield-based method and the DCF model using a required return of 5%. After this calculation we'll make some sensitivity analyzes where we consider the sensitivity of the change before and after the investment is made. We make sensitivity analysis based of change in the required return, market rents, vacancy in the property during the budget period and vacancy in the terminal year. Finally, we compare the investment in commercial property with alternative investments, including bank deposits, investment in bonds and equities. It is a general comparison of the return an investor gets over a 10 year period. This comparison results in a discussing of the Swedish and German property market, where we primarily look at the development in the capital cities.

EducationsGraduate Diploma in Accounting and Financial Management, (Diploma Programme) Final Thesis
Publication date2012
Number of pages126