Evaluating risk in real estate investments in areas of special value and environmental beauty
Cabras, Antonio
In the case study presented here, we analyse the critical aspects related to the financialization of the real estate market, we review some of the methodologies employed to evaluate risk in real estate investments and provide an example of appraisal of the so-called embedded valuee, using the approach developed by the Appraisal Research Lab of the University of Cagliari. In the context of real estate located in small areas characterised by high tourist and environmental value, such as the area selected for our case study - "Costa Smeralda" Arzachena (OT), Italy - real estate value is typically subject to strong appreciation. In many instances, the unit value of real estate in such prestigious areas can exceed that of more upmarket segments of the worldds main capital cities. The analysis of real estate investment risk is supposed to take into account a large number of factors, not always related to the actual quality of the building, including factors that are notoriously difficult to identify and evaluate, such as the permanence of those environmental characteristics that originated the real estate success of settlements like the one we examine here. The standard methodology to evaluate the risk of real estate investments may not work in this kind of locations.
Event: FIG Working Week 2012 : Territory, environment, and cultural heritage
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