Land price policies in European cities

A comparative survey

Development Corporation City of Amsterdam September 2005

Preface
The dynamics in the real estate market and the local policies are of influence to the land prices. Cities have, sometimes strong and sometime less, influence on the price forming. The relevance of the real estate prices to the cities is enormous although sometimes somewhat hidden, as these prices influence the opportunities to regenerate the territory of the city. The price of the land is an important part of the real estate market. This is the subject of the survey in front of you. Cities have to consider what their possible influence can be on the level of the prices of the land. Several factors are relevant to increase this influence. Partially this is part of national legislative and cultural context, but for sure, there are other possibilities that are less constrained. In this way, we should look to other European cities, what sort of systems and instruments influence beneficial land prices to the city. As we look at this field of interference of government we could tip issues like: - The question of the existence of a land market and the way this market is improved for public aims. - The question from a government perspective, what are the possible instruments to influence the land market. - The relation with other relevant instruments (zoning plans, user permits and so on). - The possibility to equalise revenues in active land policy to realise financially non viable developments. - The possibility to create a steady cash flow for a city. These issues are interesting but not easy to answer. We dont even have a clear idea about the existing land price policies of cities in Europe. Therefore, the Development Corporation of the City of Amsterdam sued a first research, to give some first knowledge about different forms and methods considering land price policy. Meant as a first start, Amsterdam, Frankfurt, Helsinki, London-Haringey, Stockholm, Stuttgart, Riga and Vienna have collaborated in this research. The results must be examined and stimulate further research considering the issues mentioned above. Stressing this, another comparative study is published considering the ground lease system in several cities. Amsterdam, Helsinki and Stockholm, conducted a comparison on the building process. A report about this latter comparison will be published shortly. The Development Corporation is eager to get response from other practices that might expand the scope of instruments and methods in land price policy and invites anyone to react. The Development Corporation wishes to thanks the researcher, Johanna Dornette for her work, as to the collaborative cities that answered the questionnaire.

Jeroen den Uyl Co-ordinator European Affairs Development Corporation City of Amsterdam

Table of contents

1.

Introduction : Land price policies in European cities 1.1 Summary

page 4 page 5 page 8

2.

Municipal Land Price Policy in the city of Amsterdam (2003) 2.1 The connection between land pricing and land leasing

in the city of Amsterdam 2.2 3. The residual value approach

page 9 page 9 page 11

The calculation of land prices in selected European cities 3.1. The Municipalities land policy and interference in the setting of land prices 3.2. Development of land prices in European cities 3.3. Land prices for different functions 3.3.1. Commercial residential and office functions 3.3.2. Business functions 3.3.3. Social housing functions 3.3.4. Retail and catering functions 3.3.5. Hotel functions 3.3.6. Leisure and recreational functions 3.3.7. Parking facilities

page 11 page 15 page 16 page 16 page 17 page 18 page 20 page 21 page 22 page 24 page 26

References

1 Introduction: Land Price Policies in European cities

This report gives some insight in land pricing practices of European cities. Based on a question put forward by the Amsterdam City Council about the way in which other cities calculate their land prices, the Development Corporation of the city of Amsterdam set up a questionnaire to collect information about land pricing practices in Europe. The cities of Riga, Helsinki, Stockholm, Vienna, London Haringey, Frankfurt and Stuttgart followed the invitation and kindly gave some very valuable insights in their land pricing practices. While reading this report it has to be taken in mind, that this a first approach to give an overview about different types of land pricing systems. It is in the limited frame of this research not possible to explain every system in detail, but we can give a brought overview about how the surveyed municipalities approach the task of land pricing and which are striking differences there are in Europe1. The report summarizes the cities answers to the Amsterdam questionnaire, which was designed in 2004. As Amsterdam is the starting point of the inquiry, the first part of this report is dedicated to the municipal land price policy of the city of Amsterdam. The city of Amsterdam does not only set the price of the municipality owned land within city boundaries, it also put a nearly complete stop to the outright sale of land. Municipality owned building land in Amsterdam is leased out on a perpetually renewable base and this land leasing system is of course closely connected to the land pricing policy of the municipality.2 The connection between land pricing and land leasing will be shortly described as well as the main method of land price determination in Amsterdam, which is the residual value approach. The second part of this report describes the result of the questionnaire. It gives an overview of the way in which the different cities calculate their land prices. Attention is paid to the main differences in the working method and to the approach of special functions like retail, industrial and business plots or parking facilities.

This research is carried out under the responsibility of the Development Corporation of the City of Amsterdam. The content of this research may differ from the current existing practises in the examined cities as they might vary in time. The Development Corporation is therefore not accountable to any possible irregularities in this research compared to the existent practices in the examined cities. It is advised to check the current situation at each city for further information. 2 Based on a second inquiry of the Development Corporation of the city of Amsterdam a second report was written that concentrates on the use of land leasing in European cities.

1.1 Summary
The report describes the results of a survey about the methods of land price policy and execution of that policy in a number of European cities: Frankfurt, Stockholm, Helsinki, Riga, Vienna, Stuttgart, London Haringey and Amsterdam. The conclusion is, that there are significant differences among the surveyed cities in the way they regulate and interfere in the setting of land prices. General policy approach of land pricing All surveyed cities apply an active land policy in which they are owner of land. They also buy and sell land. Basically the prices of the land are a result of the balance between supply and demand and are a result of the free economic market. Nearly all the cities experience an increase in building land prices. In Amsterdam, the prices are stable and in Frankfurt, the prices decrease. Some remarkable features about the setting of land prices for different types of real estate o Commercial residential and office functions All municipalities apply the residual value approach, but often as a support method. Frankfurt applies diverse methods, like the Comparative Appraisal Procedure, the Capitalised Value Approach and the Summation Procedure. In Vienna the residual value method is used in addition to guidelines from reference projects; o Business functions In the estimation of land prices, some of the cities take the intensity of land use into account. In the city of Frankfurt, the Committee of Land Valuation Experts determines the value per plot. A density coefficient is being used, which is different for the downtown area and the outskirts. In Helsinki and Vienna, sometimes the land price is dependent upon the floor space index, a measure of density. In Amsterdam, the density is standard taken into account in the determination of the land prices for business functions; o Social Housing functions Like Amsterdam only the cities Helsinki and Vienna apply a low fixed standard price for social housing. In Stockholm, no difference is made between housing purposes. Public housing companies rent their houses to anyone, but all rented housing has a low leasehold fee. In Frankfurt rented housing developers can ask for government grants, which cause rent reduction for a fixed number of years;

Retail and Catering Functions The situation of the shop within the shopping concentration, the location of the shop in the city and the surface area of the shop are factors that influence the land price;

Hotel functions In all cities, the land prices for hotel functions are more or less tailor made. Prices depend on factors like star classification, revenues per room, location, balance in revenues form lodging and food/beverage etc;

Leisure and Recreational functions The answers show that it is difficult to determine land prices for this type of function, which can have a lot of variation and has a low number of realizations. This is for example shown in Frankfurt, where the price sometimes depends on the surrounding area. If the leisure function is situated within a housing area, the housing land price will apply. Or the price is determined as a deduction from the former function of the land;

Parking functions Actually Amsterdam seems to be the only city that looks upon the land prices for parking facilities separately from the prices for other functions. As far as the answers show, in most other cities the land price for parking functions is included in the price for the functions that will use that same parking facilities. Amsterdam seems to be the only city, which stimulates the realization of underground parking facilities with a financial incentive. It is notable that in Helsinki, it is difficult to make parking facilities profitable, so prices are very low. That is a logical conclusion seen from the fact that the residual method is applied.

Comparison in more detail: the level of interference by the city council in the setting of land prices Looking closer to the way of setting land prices, there are some striking differences in the approach of the surveyed municipalities. In most of the cities, the mechanism of demand and supply leads to a negotiated price, without taking the building costs into account. Also in the German cities, the value of building land in Germany is in general determined by demand and supply on the market. However, this free market mechanism is limited through the functioning of a Committee of Land Valuation Experts. This committee sets guide values for land prices, based on actually realised land sales. These guide values form the starting point for the negotiations to decide about the real price. The city of Vienna often makes use of comparative figures to set the price.

Especially the cities of Amsterdam and Helsinki interfere relatively much in the setting of building land prices. The city of Amsterdam uses a more detailed version of the residual method of land pricing: On basis of the function which will be realized on a plot of land, the price of land is determined by subtracting the building costs for the real estate from the commercial value of that real estate. Amsterdam seems to be the only city, which looks consequently to building costs in determining land prices. Moreover, Amsterdam uses a standardized residual value approach. Standardized figures about value of real estate (based on market investigations by the municipality), and about the building costs of the same real estate (determined by municipal experts in building costs) form the basis for land prices. This is based on the assumption that there is a relation between value and costs. The standardized figures for land prices are being used to give insight to the city council in the financial feasibility of the urban plans in the feature. The municipality of Amsterdam does not agree upon relatively high building costs (given a certain value), which are caused by those demands that go beyond the national building laws. The rationale for this is that these demands would lead, within the residual system, to lower land prices and therefore to lower revenues for the municipality. The municipality needs these revenues to finance the function of ground production (delivering building plots to developers and social investors) and to make other possible substantial investments in the city. It balances in this way financial (negative and positive) results in all the building plots in the city. Possible questions for further investigations This research concentrates on the policy of land prices in the investigated municipalities: what system is used, how is it executed in general and more detailed for the different parts of the real estate market. The research does not give answers to questions about the role of the system of land pricing in the more general policy of urban planning in the surveyed municipalities. This could be an interesting theme for further investigation. Other possible research questions are: o o o How do the different ways of land price policy affect the relation between the municipality and the developing companies which finally realize the real estate; What are effective and efficient ways to co-operate between public and private sector, and with social investors (housing associations); It would be interesting to enlarge the investigation with some cities, which have a more different system of selling land. Maybe this gives some insight in the rewards of the different approaches; o How does the policy of land pricing in the different cities relate to new European guidelines about state aid and other competition rules.

2. Municipal land price policy in the city of Amsterdam3

Municipalities can adopt an active or facilitating land policy. If a municipality adopts an active land policy, the land in question is owned in whole or in part by the municipality and is issued in accordance with the applicable rules. In case of a facilitating land policy the role of the municipality is limited to the regulation of the activities from other market players. The Municipality of Amsterdam conducts an active land policy, which means that the Municipality actively (re)develops locations for houses, businesses or offices in order to achieve a particular spatial development. Normally the Municipality of Amsterdam does not develop real estate itself, but prepares the land for the building process. After this preparation, the land is issued to one or more developers who will develop the building(s), within a set of rules, which is defined by the city council. These rules can be about aspects of urban planning, land use, programme, financial conditions etc. The use of the location is defined in the Zoning Plan and, corresponding to that Zoning Plan, in the leasehold contract. In Amsterdam, the municipality sets the land prices. The Development Corporation, a department of the city of Amsterdam, directs the land pricing process. This land price policy is relevant and obligatory for the city as a whole. Unless the fact that the municipality has 14 city districts governed by elected members from the local inhabitants and that, these city districts have executive powers regarding urban development. The land price policy applies for the whole city in order to prevent competition, unnecessary coordination and inequality of conditions between different parts of the city. Two fundamental tasks of the Development Corporation are: 1. Issuing land that is ready for construction and 2. Administering issued leasehold rights For both tasks, land price calculation sets the necessary base. The Development Corporation also administers some central funds for all urban plans. With these funds, it is possible to equalise the positive results in the municipal exploitation of plans with the negative results of other plans. Land prices are crucial because they should allow for the desired development, contribute to a stable development of the real estate market and determine the revenues generated in the planning zones. (2003 Municipal Land Price Policy Document)

The Amsterdam land price policy is frequently adapted to new market situations or change policy goals. This report is based on the version of 2003.

The land prices are determined on basis of the market value for different types of real estate and the building costs for those different types of real estate. Therefore, the Development Corporation monitors the development of the market forces supply and demand. The land price policy - as set out in the 2003 Municipal Land Price Policy Document applies for all land that is owned by the Municipality and situated within the cities borders. The applied land price policy is functional which means that the price of the land relates to the function, which is going to be realized on this land. The land price varies depending on the location and the function. Land prices for commercial residential and working functions are based on the residual value approach, which is described in chapter 2.2. For social housing and social facilities a fixed (low) price is ascribed which applies all over the city.

2.1 The connection between land pricing and land leasing in the city of Amsterdam
Building land in Amsterdam is not sold, but let on a perpetually renewable base. The city is and will be the owner of the land. In this way, the municipality also gains from the rise in value of the land, which is partly caused by the investments, made by the same municipality. The land prices form the base for the amount of money, which has to be paid by the individual owners of leasehold contracts, yearly4. When leaseholders want to pay their interest each year, they have a choice: they can fix the interest rate of their contract for only one year, for ten years or for 25 years. The Amsterdam City Council determines these three different interest rates for the leasehold contracts each three months. The longer the fixed period, the higher will be the interest rate.

2.2 The residual value approach

Land prices are determinated by the residual value approach. Using this method, the first step for setting the price for each location is to determine the commercial value of the new real estate constructed on the land. This value is determined by the function of this real estate. From this commercial value (either the market price or the investment value), the construction costs and all additional expenses must be subtracted. The difference

The lessor can also choose to pay all future annual fees at once.

between the commercial value and the construction costs is the residual value, which can be ascribed to the land as the price of the land. It is practically impossible to calculate a residual land price every single time that building land is issued in the city of Amsterdam. Therefore, a standardized residual value method applies for functions in the private sector. This standardized method comprises of average all-in construction costs, which are assumed for each function, based on a number of selected reference projects. These reference projects form the base for a system of tables of standardized residual prices for each function. The all-in construction costs comprise construction costs and additional expenses and exclude the costs of the land. As the all-in construction costs are one important variable for the calculation of the residual land value, the ups and downs of the construction costs have a significant effect on the development of the land prices. (2003 Municipal Land Price Policy).

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3. The calculation of land prices in selected European cities

The following chapter summarizes the cities answers to individual questions. First, it has to be taken into account that the city of Amsterdam interferes in the setting of the land prices. This could be an exceptional concept; therefore, the questions one and two focus on the subject of interference in the matter of land price determination and the type of municipal land price policy. The questions three and four focus on the development of land prices and finally the questions five to eleven are dedicated to different approaches of land price setting regarding special functions.

3.1 The Municipalities land policy and interference in the setting of land prices
Question 1: Are land prices of municipality owned land regulated in your city? City Frankfurt Helsinki Riga Stockholm Vienna Stuttgart Amsterdam
= applicable

Yes

No

If the answer is YES, is your municipality free to set the price of municipality owned land? Helsinki: Yes, except for state subsidized housing. For this function, yearly set price zones do exist which are negotiated between the state housing authority and the municipalities in the Helsinki metropolitan area. Amsterdam: Yes, the municipality is free to determine its land pricing policy, of course within rules of good governance, equal treatment and fair competition.

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Question 1a: How does your municipality dispose of land?

City

Negotiation

Tender

Other See comments

Frankfurt Helsinki Riga Stockholm Vienna Amsterdam

= applicable - = No comment

Comments: Frankfurt: In several areas, i.e. urban development measures, the price (which means the market value) is always ascertained by the Committee of Valuation Experts5. The Municipality of Frankfurt is forced to dispose of the parcel at the price determined by the Committee of Valuation Experts. Legal Base: 165 Federal Building Code, 169 (8) Federal Building Code, 192 Federal Building Code. Helsinki: In Helsinki, varying methods apply. Sometimes they use a tender, but more often the municipality sets the land price. In case of special value plots, the price can be set in negotiation with the customer. Sometimes also, commercial real estate evaluators are asked for advice. When land is leased and not sold, the price is set for a larger area according to the market information of the municipality of Helsinki. Riga: There are some special governmental regulations how the municipality or the state may dispose of the land, no more specified comments. Stockholm: No comments. Stuttgart: The value of building land in Germany is generally determined by demand and supply on the market. Normally the residual value approach is not used to determine the price. Each city has a Committee of Ground Valuation Experts (Gutachterausschuss),
See also comments of the Municipality of Stuttgart. Every German city has an independent Committee of Ground Valuation Experts, which determines the guide values of building ground.
5

12

which determines guide values of the building ground. Those guide values are set according to the information on actually realised ground sales. Every selling contract has to be copied and forwarded to the Committee of Ground Valuation Experts. Additionally general building land market experiences are taken into account. The guide values are decided and published by the Committee of Ground Valuation Experts. The Guide values form the base of general real estate valuations. In addition, the Municipality of Stuttgart as a landowner has to sell land for prices orientated at the actual guide values of the Committee.6 Vienna: If it is impossible to come to an agreement between the involved parties, land expropriation is also applied. Amsterdam: Land prices are set by the municipality, determined by the city council, based on market values and building costs of the real estate which will be realized. These prices are often subject for negotiation with companies who will develop the real estate. The director of the municipal Development Corporation has the mandate to differ from the valuated prices and reports about the use of his mandate to the city council. Sometimes, in case of special functions, land is tendered. Question 2: Does your municipality apply an active land policy? City Frankfurt Helsinki Riga Stockholm Vienna Amsterdam
= applicable - = No comment

Yes

No

Comments Frankfurt: YES: The tools for an active land policy are given in the Federal Building Code, i.e. Legally Binding Land-Use Plan (8ff), Land Reallocation (45ff), Urban Redevelopment Measures (165 ff) and several others. NO: There is also the possibility for private real estate companies to develop the land they own with an Urban Redevelopment Contract or an Infrastructure Plan (11 & 12
FBC). In these cases the contract partner is always the municipality.
6

This is the only and very useful comment of Stuttgarts city development experts. The described procedure applies all over Germany.

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Helsinki: The city of Helsinki owns a substantial part (~ 70%) of within the city boundaries. The city of Helsinki also has statutory power to make general and detailed land use plans for the city area. So the city carries out an active land policy in the traditional sense, which means buying the land before statutory plans are drawn up and then develop the area. When the plot in question is privately owned, the owner has to discuss every planned development with the city planning department in order to find acceptable solutions for the use of the land. If the value of privately owned land increases substantially due to the planning prices, there will also be negotiations with the cities real estate department about how the owner should compensate the city, i.e. cover parts of the costs caused by the development of necessary infrastructure. The owner, paying parts of the incremental value to the city of Helsinki, mainly compensates these investments. Riga: The municipality of Riga uses urban planning as an instrument for being active in land policy. Stockholm: City Planning Administration has a planning monopoly, but an active land policy is taken out through co-operation between the City Planning Administration and the Real Estate and Streets Administration, the latter being responsible for managing municipality owned land. Private land owners can also be involved in the active land policy. Vienna: The municipality decreed the land use- and development plan, which defines what developments are allowed on the different plots. There are also funds which are financed by public means and which purchase land in certain city areas in order to sell it to enterprises or settlers. Amsterdam: The city of Amsterdam owns, apart form a substantial part of the inner city, nearly the land within the city boundaries. Through the leasehold system, the city holds the ownership of the land. Like in Helsinki, when plots of land are privately owned, the owner has to discuss every planned development with the city-planning department in order to find acceptable solutions for the use of the land. The city council has to approve each zoning plan. New legislation about ground exploitations makes it possible for the municipality to oblige the private owner to cover part of the costs, which the municipality has to make to connect the plot to the urban infrastructure.

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3.2 Development of land prices in European cities

Question 3: How is the development of the land prices in your city? City Frankfurt* Helsinki Riga Stockholm Vienna Amsterdam**
*: Decrease in case of office sites, stable in case of housing **: The general view is that land prices are stable for all functions for the last one or two years = applicable - = No comment

Increase

Decrease

Question 4: Which factors influence the development of the land value? Frankfurt: Changes concerning the demand and supply of building land led to changes in the land prices. Also a tighter regulation on the national level: The discussion of an abolition of the Eigenheimzulage caused an increase of transactions in 2002, which did not lead to a significant rise in the real estate prices. Now real estate developers in Frankfurt communicate that houses over a certain price level will not be accepted. In the last eight years, there has not been a rise in the construction costs in Germany. Furthermore, the influence of the building costs on the development of the real estate prices is very low and hardly significant. Helsinki: In Helsinki, lead all factors suggested by the questionnaire to an increase of the level of land prices: a change in the demand and supply of building land, as well as tighter regulations on national and local level and a rise in the building costs. Riga7: The land prices in Riga are increasing because of a change in the demand for building land. Stockholm: The land prices in Stockholm were decreasing from autumn 2001 until the end of 2003 and remain stable now. Due to tighter regulations on national and local level,

Riga did not give any further answers or comments and therefore does not appear in the following chapters.

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the land prices are decreasing. The influence of a possible rise or fall in the building costs depends on the overall situation of the economy at the time. Vienna: Changes in the demand and supply of building land and due to tighter regulations on national and regional level, the land prices in Vienna are increasing. Amsterdam: The land prices in Amsterdam did raise substantially from the mid 1990s until the year 2002. This indicates a period of high economic growth rates in the Netherlands. In the year 2002 the land prices for housing areas declined substantially, due to the stabilization of the market values (in fact a decline of values in the upper market areas) and the continuing rise of building costs. The land prices for office areas are stable since 2002. This is more a political decision (because of high rates of vacancy) than a reflection of the market situation in the residual system8.

3.3 Land prices for different functions

3.3.1 Commercial residential and office functions
Question 5: Does your municipality apply the residual value approach for the land price for commercial residential and office functions? City Frankfurt Helsinki Stockholm Vienna Amsterdam
= applicable

Yes

No

Comments Frankfurt: The Valuation Ordinance allows the use of the Comparative Appraisal Procedure, the Capitalised Value Appraisal Procedure and the Summation Procedure. The Comparative Appraisal Procedure is used to determine land prices in Frankfurt. The Capitalised Value Appraisal is used to determine the value of i.e. office buildings and the Summation Procedure is used to determine the price of i.e. terraced houses.

In order to disincentive, the market developments to build office space in the latest years the residual system is therefore upheld up temporarily for this type of functions.

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The residual value approach serves as support method especially for the Capitalised Value Appraisal, if there arent sufficient comparative prices. Helsinki: The residual value approach is mainly used as an additional or comparative method. Market information such as statistics on real estate sales, rent levels etc. is also used. Tendering sometimes checks the price level. Also private value estimates are sometimes used aside. Stockholm: Except for industrial use of land the residual value approach is used in Stockholm. Vienna: The residual value approach applies as well as a comparison with prices from other recently finished land transactions. Amsterdam: In Amsterdam the residual value approach is applied for free market housing functions (all housing except social housing) and for office functions. The market values are estimated on basis of statistics, transaction prices, rent levels etc. Experts within the Development Corporation qualify the building costs. In case of special functions, sometimes a comparative method is used, knowledge of private companies is bought or a tender determines the price.

3.3.2 Business functions

Question 6: Do you apply a comparable incentive to intensify the use of land for business purposes? Name of the city Frankfurt Helsinki Stockholm Vienna Amsterdam
= applicable - = No comment

Yes -

No -

Comments: Frankfurt: The municipality of Frankfurt has the right to regulate the intensity of use in the Land Use Plan. An older plan was based on the Floor/Space Index (FSI; the FSI indicates the relationship between the developed floor area and the plot area). The cur-

17

rent plan uses not FSI, but the specification with the gross floor area. This is done because developers in Frankfurt calculate the price per gross floor area. The Committee of Valuation Experts published Conversion Coefficients to determine the value per plot area based on the FSI. Two different coefficients are used for business purposes: one applies for building areas downtown, the other in the outskirts of Frankfurt. Helsinki: The decisive factor for land pricing in Helsinki is the intensity of building on a certain plot. Prices are almost solely given per square meter of gross floor area. In detailed plans for the given city area the right to build on a certain plot or a quarter of plots is indicated either by an absolute number like 4.000 which means the maximum of gross floor area in square meters, or by an FSI number, like for instance 1.5. This FSI number means that if the plot area for instance was 1000 square meters, developers are allowed to build 1500 square meters of gross floor area on this plot. Stockholm: In Stockholm, the price per gross plot area applies for whatever business land function. Vienna: The prices for business functions in Vienna are set by the residual value approach and by comparison with prices from other recently finished land transactions. In some cases these prices do not apply for square meters of the gross floor area, but for the possible net floor area. Amsterdam: In Amsterdam, the land prices for business estates are calculated according to the residual value approach. Owing to the shortage of space for business estates in the city, the FSI is used in order to stimulate the intensity of the use of space. If the FSI is less than 1 the land price per square meter is calculated per plot area. If the FSI is greater than 1 the land price is calculated per square meter per gross floor area.

3.3.3 Social housing functions

Question 7: Does your municipality apply a low fixed land price for social housing? Name of the city Frankfurt Helsinki Stockholm Vienna Amsterdam
= applicable

Yes

No

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Comments: Frankfurt: There is the possibility to ask for governmental financial aid in case of building rented housing. Accepting this grant causes a reduction of rent for a fixed number of years. Other tools are also used in Frankfurt: the Land-Use Plan requires a fix portion of housing space in office areas, the need to rebuild housing space if this has been wantonly destroyed. The real estate market in Frankfurt implies mainly terraced housing and condominium (partly for hire on a private market). Helsinki: The land price for social housing is controlled, but the actual price depends on the relation to market prices. Even in the case of social housing the location of the plot affects the price. The land prices for government subsidised social housing is expressed in per square meters of gross floor area. The land price level for housing production with quality and price controlled flats (a special system called HITAS) is normally 80% of the medium market price and the land price for government subsidized rental housing is 60% of the medium market price. Stockholm: There is no social housing in Stockholm, only public housing companies who let to everyone without any exception, the income of the households is not important. However all rented housing - public or private - has a low leasehold fee. The rent is higher in the inner-city districts (what it is considered to be a more attractive housing district) and lower in the suburbs. Vienna: In Vienna, land is sold to non-profit housing agencies to a fixed maximum price per square meter floor area. There are two prices, one applying in the city centre, the other in the suburbs. Amsterdam: In Amsterdam, the land price for social houses is fixed on a low rate. Social housing means a maximized rent per month and the house is owned by an affirmed housing corporation, which has to accomplish some societal tasks (provide housing for the lower income groups). The allocation of the houses is regulated, and the rise of the rental levels is regulated as well. The land price for social housing is per unit, not per square meter. For apartment building there is a reduction factor for the land price, based on the fact that the construction costs per square meter incline when the building is higher.

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3.3.4 Retail and catering functions

Question 8: Which factors apply for the determination of land prices for retail and catering functions in your city? Comments: Frankfurt: The price for retail depends on the location of the shop, the situation within the shopping concentration and the situation of the shopping area (neighbourhood, district). The surface area of the site does not influence the price. Helsinki: The location of the shop influences the price as well as the situation within the shopping area, the surface area of the site and the situation of the shopping area. Small suburban shopping centres are problematic because they are considered necessary to maintain local commercial services, but competition with mega markets eliminates the profitability of these little local sites. This also influences the setting of the land price level. Stockholm: The location of the shop influences the price as well as the situation within the shopping area, the surface area of the site and the situation of the shopping area. Vienna: The location of the shop influences the price as well as the situation within the shopping area, the surface area of the site and the situation of the shopping area. Additionally the prices of comparable recently finished transactions are taken into account. Amsterdam: The location of the shop influences the price as well as the situation within the shopping area, the surface area of the site and the situation of the shopping area. There is a big difference between land prices within the main shopping areas in the inner city, which have a national or even an international function (tourism!) and local smallscale shopping areas, or individual shops in residential areas. The land prices can vary with a factor of 40-50! This variance is mainly caused by differences in market value and to a much lesser extent by differences in building costs. Because of the big variance in market values, there are no standardized land prices. Each case has to be handled on its own.

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3.3.5 Hotel functions

Question 9: Which of the following factors apply in your city for the determination of land prices for hotel functions? Factors The average revenue per room The occupancy The distance to the city centre The appeal to tourists The proximity to the airport/station The hotels star segment The hotels reputation The ratio of income from lodgings compared to other income (food and beverage) The division of the surface area into lodging space, service areas and public areas. Other
= applicable - = No comment n.a. = Not applicable

Frankfurt

Helsinki

Stockholm

Vienna

Amsterdam

n.a. n.a.

n.a.

Comments: Frankfurt: Generally, the land price does not depend on the type on the building that is going to be built on the plot, but on the buildings that are allowed by the land use plan. If there is no general Land-Use Plan, the price depends on the factors indicated in the table. Helsinki: The land price for hotels must be tailored according to specific conditions. These factors compete with each other and should be considered equal in relation to each other. One important aspect is the starting period - as it takes a lot of time to get a new hotel established on the market. Usually, this factor is taken into account in the beginning of the leasing period.

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Stockholm: In Stockholm, it is the whole concept and the location of the Hotel that matters. Vienna: They also compare the prices of recently finished transactions, but usually there are no transactions concerning hotels. Amsterdam: The city of Amsterdam uses the residual approach in establishing the land price for hotels. The factors indicated in the table above are used to determine the market value of a hotel. The building costs of the hotel are also taken into consideration to fix the land price. Because of the large variety of factors, which are important in determining the market value, combined with the fact that the amount of hotels, which are realized, is relatively low, there are no standardized land prices. Each case has to be handled on its own.

3.3.6 Leisure and recreation functions

Question 10: Which of the following factors apply for the land prices of leisure functions in your city? Factor Frankfurt Helsinki Stockholm Vienna Amster dam The development density Relation to other functions The average return to be realized by the leisure facility The location The scale of activities The service area The visitors intensity The opening hours Other
= applicable - = No comment n.a. = Not applicable

n.a. n.a. n.a. n.a. n.a.

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Comments: Frankfurt: If the parcel is privately owned, the owner will ask for the price of a parcel, which is used for the surrounding purposes. If a housing area surrounds the leisure land, the land price will be the price that applies in this housing area. A second possibility to determine land prices for recreational (or other) functions is a deduction of the prices from the use the plot had before it became a recreational facility, like agricultural or forestry land, land proposed for future development, undeveloped land or improved land. Helsinki: The type of the leisure function, the relation between commercial activities and public service related activities are also taken into account, as well as the estimated effect on tourism. Stockholm: No comments. Concerning recreational functions the land price depends on the fact if the land is for recreational use provided on commercial terms or if it is for free public recreational use. Vienna: The average return to be realized by the leisure facility is considered by the residual value approach. They also compare the prices of recently finished transactions. Amsterdam: The average return to be realized by the leisure facility is considered by the residual value approach. There are no standardized land prices, because of the big variety of leisure functions and the low amount of realized plots. Sometimes the experiences (market value and building costs) from resembling cases are used, even if they are located in different parts of the country. Each case has to be handled on its own.

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3.3.7 Parking facilities

Question 11: Which of the following factors apply for the land price of parking facilities in your city? Factors Is a separated land price calculated for parking facilities? Is the land price based on the residual value approach? Do you apply any special subsidy/contribution for the realization of underground parking facilities?
= applicable - = No comment n.a. = not applicable

Frankfurt n.a.

Helsinki

Stockholm

Vienna n.a.

Amsterdam

n.a.

n.a.

n.a.

n.a.

Comments: Frankfurt: In general, underground parking spaces are only constructed in combination with a certain building. For the part-time public use, some incentives are granted, but they depend on negotiation and vary as the case arises. Helsinki: In general, the land price for parking facilities is included in the price of the land for the function the parking facility is build for. Separate/independent underground parking facilities or parking buildings are priced separately on a low price level. It is considered very difficult to make parking businesses profitable except in very central locations. Stockholm: No comments. Vienna: Underground freeholds are issued for about 4% of the negotiated land price (free market price) per year. Amsterdam: The land price for parking facilities is separately determined for autonomous, public facilities as well as for facilities, which are related to other functions (residential, offices, etc.). The residual value approach is used. In areas of the cities with rela-

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tively low market value of real estate, the residual value of underground parking facilities can be negative. The municipality does not subsidize the realization of those underground facilities. The only exemption is made for non-profitable parking solutions, which are related to social housing and which has to be realized because there are no other opportunities (spatially) to realize those parking solutions. In those cases, the municipalities pay the deficit (value minus costs).

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References:
The completed questionnaires of the cities of Frankfurt, Helsinki, Riga, Stockholm, Stuttgart and Vienna. 2003 Municipal Land Price Policy Document of the Amsterdam Development Corporation.

Author: Johanna Dornette Editors: Jeroen den Uyl, Cor de Jong

Contacts: For further information about this research, please contact Mr Cor de Jong Mr Jeroen den Uyl [email protected] [email protected]

Mr Erwin Daalhuisen [email protected]

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