I am genuinely sorry to keep coming back to your proposal, but I’m afraid that there is still one thing that I believe needs further reflection. It’s in Section 5 “Recommendations” where it says “For The Reef, we recommend introducing a price differential at no less than what is currently accepted by the real estate market, and possibly more, say between 10% and 50%.”
First a small detail that I think will create for less confusion. For the numerically less literate people (I count myself!), would you agree that it would be easier to express the price fork as a +/- compared to the average price? So instead of 10%, we would say +/- 5%?
Next up the point that I think needs some further reflection. For me the purpose of this proposal is to make sure we are on the same page when it comes to unit pricing, so that we won’t get any surprises once we start putting prices on the different units. Knowing in advance, even if approximately, how much a unit will cost, is also very important for most people.
Therefore, saying that it will be between 10 and 50% does not really work for me, because the gap is too wide to be predictable.
Furthermore I personally don’t think it is a good idea to diverge too much from the width of a price fork that is common on the market, for two reasons:
Using a +/- 25% price fork would feel unfair to me, because it leads to a gigantic subsidisation of the people who pay more to the people who pay less. This to me is problematic, because if somebody who bought a unit at a price on the lower end of the price fork decides to sell their unit after a couple of years, they will make a ginormous profit, which will be in part at the expense of the people who subsidised it.
A numerical example makes this clearer. Say we are speaking of a 30 m² studio. If we do a +/- 10 % price fork on 4000 euro average, the lower end would be 3600 euro, which would result in the studio costing 108.000 euro. If we go up to +/- 25%, we end up at 3000 euro, making the studio cost 90.000 euro.
At the upper end of the price fork a 25% difference also doesn’t feel like a good idea to me, because I think it makes these units less attractive to people who will join at the very latest. People who want to leave The Reef before it is built will need somebody to buy them out, and if their unit is relatively much more expensive compared to the average price, it may be more difficult to find somebody. Likewise, if there would be some units left at the very end, it’s important that their pricing makes sense to an outsider.
Would you be willing to dig a little deeper into the sense and nonsense of the width of the price fork? Happy to help of course whenever you like. (and saying no is of course also always an option ;))
Hello Lee,
thank you for your feedback and let me touch upon this point tonight at our team finance meeting. I had first discussed this with Ugne and Alberto about two weeks ago and perhaps there is some feedback to be taken from the members who were not contributing at the time.
I understand you want me to come up with concrete max and min values around the average construction price. My idea with the differential was to keep some flexibility, i.e. 10% can be allocated to +/-5 or +2/-8 where several units above the average price would subsidise one or two on the lower price end. Do we need to make it more concrete at this point?
I see your point and I think in the end it comes to a discussion of how much market we want vs. how much financial inclusion, which is why I wanted to explore this point together with reeflings (just to get a feeling of the communal vibe around this topic). I understand you would want to reduce the difference and I was initially also on that side, but then I learned that the difference of m² prices at Brutopia was even beyond the 50%. So as you suggested, let me get some further input from the team, and then feed back to you.
Yes, I think it needs to be as concrete as possible, because otherwise it becomes difficult for people to estimate the cost of their units. For the sake of simplicity I would keep the plus and the minus equal, though I’m less concerned about that.
The situation in Brutopia is a bit different in that a large part of their group are either family or close friends of each other, which makes for a different dynamic in terms of subsidising each other. They are also all native Belgians, most of them with children, and so the risk that somebody would decide to move (and thus cash in the cross-subsidy).
I’m all for discussing it at the plenary of course. What I’m trying to flag beforehand is that as a member of this group, cross-subsidising that goes significantly beyond what is seen on the market is outside of my range of tolerance (for the reasons explained in my post above).
I agree with Lie that a margin of 10-50% is unpredictable and I am also having concerns regarding fairness with such a big differentiation.
On another note, as mentioned in our last Team Finance meeting, I need more structure in our communication threads. This thread is very confusing as it contains many completely unrelated items and to find the document Lie’s comment related to, I actually had to scroll up 36 posts. I would propose to create narrower sub-threads per topic and not put everything that is related to Team Finance into one single mega-thread.
Indeed. Like I said, no perfect solution. A nice feature of Discourse is that moderators can re-organize threads, for example splitting them if they veered into a topic that no longer is represented by the title. Do you want me to attempt to split the “price differential” posts into their own topic?
Average €/m² ranges from 3.200 to 4.500 (without TVA). There are also two high end projects in Avenue Louise and Auderghem which I’m not quoting here.
Prices can vary substantially within a project. Take for instance Forest Village 2 where the studio on the third floor comes at 4306€/m² compared to a 2 room appartment for 3400€/m² on the same floor. It is not always clear as to why prices differ substantially, however there are two patterns (see next bullet)
As expected, appartments on lower floors are cheaper than the ones on higher floors. However, one factor I haven’t accounted for yet in the proposal is that studios and one room appartments come more expensive than 2 and 3 room appartments. I find that a studio costs 4.6% more when compared to a project’s average price while a three room appartment is 3.52% lower than the average price. A first quick search on the internet suggests that there is a shortage for smaller appartments on the market which could explain for the difference … I’ll take this further with a friend of mine who is an architect.
Let me follow up when I have gathered more insights and I would also like to discuss with Team Finance how we translate the insights from market prices into the current proposal .
