IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i15p4191-d254368.html
   My bibliography  Save this article

Risk Premium Assessment for the Sustainable Valuation of Urban Development Land: Evidence from Spain

Author

Listed:
  • José María Codosero Rodas

    (Environmental Resources Analysis Research Group (ARAM), University of Extremadura, 06006 Badajoz, Spain)

  • José Cabezas Fernández

    (Environmental Resources Analysis Research Group (ARAM), University of Extremadura, 06006 Badajoz, Spain
    VALORIZA—Research Centre for Endogenous Resource Valorization, 7300-110 Portalegre, Portugal)

  • José Manuel Naranjo Gómez

    (Sustainable Development of the Territory Research Group (DESOSTE), University of Extremadura, 10003 Caceres, Spain
    Polytechnic School, University of Extremadura, 10003 Caceres, Spain)

  • Rui Alexandre Castanho

    (Faculty of Applied Sciences, WSB University, 41-300 Dąbrowa Górnicza, Poland)

Abstract

One of the most important parameters in sustainable urban land valuation is the risk premium. Correct assessment of the risk premium is essential for sustainable valuation. Generally, it is estimated that traditional financial models or historic rates do not take into account the specific risk factors of an investment project. In this paper, we propose a sustainable model to obtain it. It is based on investment risk factors and the urban planning land development stages. We conducted a study in Badajoz, Spain, on four urban stages: first, land without an execution program; second, land with an execution program; third, land with reparceling; and fourth, fully developed and urbanized land. We calculated one different risk premium value for each urban stage. The results show that with this model, we can obtain the risk premium at any time during urban planning development. The urban stage is one of the most influential factors in the risk premium value. It decreases during urban planning development, and fully developed and urbanized land has a lower risk premium.

Suggested Citation

  • José María Codosero Rodas & José Cabezas Fernández & José Manuel Naranjo Gómez & Rui Alexandre Castanho, 2019. "Risk Premium Assessment for the Sustainable Valuation of Urban Development Land: Evidence from Spain," Sustainability, MDPI, vol. 11(15), pages 1-21, August.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:15:p:4191-:d:254368
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/15/4191/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/11/15/4191/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Matteo Brunelli & Luisa Canal & Michele Fedrizzi, 2013. "Inconsistency indices for pairwise comparison matrices: a numerical study," Annals of Operations Research, Springer, vol. 211(1), pages 493-509, December.
    2. Thomas L. Saaty & Luis G. Vargas, 2006. "Decision Making with the Analytic Network Process," International Series in Operations Research and Management Science, Springer, number 978-0-387-33987-0, September.
    3. Mayer, Christopher J. & Somerville, C. Tsuriel, 2000. "Land use regulation and new construction," Regional Science and Urban Economics, Elsevier, vol. 30(6), pages 639-662, December.
    4. Weber, Thomas A., 2014. "On the (non-)equivalence of IRR and NPV," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 25-39.
    5. Leopoldo Sdino & Paolo Rosasco & Sara Magoni, 2018. "Real Estate Risk Analysis: The Case of Caserma Garibaldi in Milan," IJFS, MDPI, vol. 6(1), pages 1-13, January.
    6. Thomas L. Saaty, 2006. "The Analytic Network Process," International Series in Operations Research & Management Science, in: Decision Making with the Analytic Network Process, chapter 0, pages 1-26, Springer.
    7. Kenneth J. Arrow & Herve Raynaud, 1986. "Social Choice and Multicriterion Decision-Making," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511754, December.
    8. Vaidya, Omkarprasad S. & Kumar, Sushil, 2006. "Analytic hierarchy process: An overview of applications," European Journal of Operational Research, Elsevier, vol. 169(1), pages 1-29, February.
    9. Yoram Wind & Thomas L. Saaty, 1980. "Marketing Applications of the Analytic Hierarchy Process," Management Science, INFORMS, vol. 26(7), pages 641-658, July.
    10. José Maria Codosero Rodas & José Manuel Naranjo Gómez & Rui Alexandre Castanho & José Cabezas, 2018. "Land Valuation Sustainable Model of Urban Planning Development: A Case Study in Badajoz, Spain," Sustainability, MDPI, vol. 10(5), pages 1-18, May.
    11. Robert H. Edelstein & Konstantin Magin, 2013. "The Equity Risk Premium Puzzle: A Resolution - The Case for Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 35(4), pages 393-406.
    12. Joseph Gyourko & Albert Saiz & Anita Summers, 2008. "A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index," Urban Studies, Urban Studies Journal Limited, vol. 45(3), pages 693-729, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Codosero Rodas, José Maria & Castanho, Rui Alexandre & Cabezas Fernández, José & Naranjo Gómez, José Manuel, 2020. "Sustainable valuation of land for development. Adding value with urban planning progress. A Spanish case study," Land Use Policy, Elsevier, vol. 92(C).
    2. Rui Alexandre Castanho & Gualter Couto & Pedro Pimentel & Célia Barreto Carvalho & Áurea Sousa, 2020. "Territorial Management and Governance, Regional Public Policies and their Relationship with Tourism. A Case Study of the Azores Autonomous Region," Sustainability, MDPI, vol. 12(15), pages 1-16, July.
    3. Chung, Kenneth Hsien Yung & Li, Dan & Adriaens, Peter, 2023. "Technology-enabled financing of sustainable infrastructure: A case for blockchains and decentralized oracle networks," Technological Forecasting and Social Change, Elsevier, vol. 187(C).
    4. Couto, Gualter & Martins, Dulce & Pimentel, Pedro & Castanho, Rui Alexandre, 2021. "Investments on urban land valuation by real options – The Portuguese case," Land Use Policy, Elsevier, vol. 107(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baffoe, Gideon, 2019. "Exploring the utility of Analytic Hierarchy Process (AHP) in ranking livelihood activities for effective and sustainable rural development interventions in developing countries," Evaluation and Program Planning, Elsevier, vol. 72(C), pages 197-204.
    2. Wolfgang Ossadnik & Stefanie Schinke & Ralf H. Kaspar, 2016. "Group Aggregation Techniques for Analytic Hierarchy Process and Analytic Network Process: A Comparative Analysis," Group Decision and Negotiation, Springer, vol. 25(2), pages 421-457, March.
    3. Ali Aghazadeh Ardebili & Elio Padoano & Antonella Longo & Antonio Ficarella, 2022. "The Risky-Opportunity Analysis Method (ROAM) to Support Risk-Based Decisions in a Case-Study of Critical Infrastructure Digitization," Risks, MDPI, vol. 10(3), pages 1-22, February.
    4. Ester Guijarro & Cristina Santadreu-Mascarell & Beatriz Blasco-Gallego & Lourdes Canós-Darós & Eugenia Babiloni, 2021. "On the Identification of the Key Factors for a Successful Use of Twitter as a Medium from a Social Marketing Perspective," Sustainability, MDPI, vol. 13(12), pages 1-15, June.
    5. Babak Daneshvar Rouyendegh & Asil Oztekin & Joseph Ekong & Ali Dag, 2019. "Measuring the efficiency of hospitals: a fully-ranking DEA–FAHP approach," Annals of Operations Research, Springer, vol. 278(1), pages 361-378, July.
    6. Ravi Kumar Gedela & K. Krishna Mohan & V. Kamakshi Prasad, 2018. "Application of BOCR models in service oriented architecture (SOA): study on model validation through quantification for QoS considerations," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 9(6), pages 1346-1354, December.
    7. Hocine, Amine & Kouaissah, Noureddine, 2020. "XOR analytic hierarchy process and its application in the renewable energy sector," Omega, Elsevier, vol. 97(C).
    8. Babak Daneshvar Rouyendegh & Kazim Topuz & Ali Dag & Asil Oztekin, 2019. "An AHP-IFT Integrated Model for Performance Evaluation of E-Commerce Web Sites," Information Systems Frontiers, Springer, vol. 21(6), pages 1345-1355, December.
    9. Kuliš Marija Šiško, 2020. "Selection of Project Managers: An Overview," Business Systems Research, Sciendo, vol. 11(2), pages 99-116, October.
    10. Theißen, Sebastian & Spinler, Stefan, 2014. "Strategic analysis of manufacturer-supplier partnerships: An ANP model for collaborative CO2 reduction management," European Journal of Operational Research, Elsevier, vol. 233(2), pages 383-397.
    11. Benevenuto, Rodolfo & Caulfield, Brian, 2020. "Examining transport needs in the global south using a screening framework," Journal of Transport Geography, Elsevier, vol. 88(C).
    12. Ahmad Issa Farhan & Mohammad Naser Mousa Hamdan, 2017. "Evaluating performance of accounting information systems using a fuzzy logic approach," Proceedings of Business and Management Conferences 5207431, International Institute of Social and Economic Sciences.
    13. Yildirim, Ercan & AR, Ilker Murat & Dabić, Marina & Baki, Birdogan & Peker, Iskender, 2022. "A multi-stage decision making model for determining a suitable innovation structure using an open innovation approach," Journal of Business Research, Elsevier, vol. 147(C), pages 379-391.
    14. J. Claver & A. García-Domínguez & M. A. Sebastián, 2018. "Decision-Making Methodologies for Reuse of Industrial Assets," Complexity, Hindawi, vol. 2018, pages 1-17, February.
    15. De Ambroggi, Massimiliano & Trucco, Paolo, 2011. "Modelling and assessment of dependent performance shaping factors through Analytic Network Process," Reliability Engineering and System Safety, Elsevier, vol. 96(7), pages 849-860.
    16. Murat Ayar & Alper Dalkiran & Utku Kale & András Nagy & Tahir Hikmet Karakoc, 2021. "Investigation of the Substitutability of Rubber Compounds with Environmentally Friendly Materials," Sustainability, MDPI, vol. 13(9), pages 1-14, May.
    17. S. Toosi & J. Samani, 2012. "Evaluating Water Transfer Projects Using Analytic Network Process (ANP)," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(7), pages 1999-2014, May.
    18. Dragoi, Marian, 2018. "Joining or not joining non-industrial private forests into a single management unit: A case-study shaped as an Analytic Network Process," Forest Policy and Economics, Elsevier, vol. 89(C), pages 63-70.
    19. S. Razavi Toosi & J. Samani, 2014. "A New Integrated MADM Technique Combined with ANP, FTOPSIS and Fuzzy Max-Min Set Method for Evaluating Water Transfer Projects," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(12), pages 4257-4272, September.
    20. Jordi Gallego-Ayala & Dinis Juízo, 2014. "Integrating Stakeholders’ Preferences into Water Resources Management Planning in the Incomati River Basin," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(2), pages 527-540, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:15:p:4191-:d:254368. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.