Volume 25, Issue 1 (2025)
QJER 2025, 25(1): 291-318 |
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Moatamedi M, Darvish Motevlli M H. Designing a Dynamic Model for Evaluating Construction Investment Projects A System Dynamics Approach. QJER 2025; 25 (1) : 12
URL: http://ecor.modares.ac.ir/article-18-74581-en.html
URL: http://ecor.modares.ac.ir/article-18-74581-en.html
Designing a Dynamic Model for Evaluating Construction Investment Projects A System Dynamics Approach
1- Assistant Professor, Department of Industrial Management, Nowshahr Branch, Islamic Azad University, Nowshahr, Iran
2- Assistant Professor, Department of Industrial Management, West Tehran Branch, Islamic Azad University, Tehran, Iran ,mhd.darvish@gmail.com
2- Assistant Professor, Department of Industrial Management, West Tehran Branch, Islamic Azad University, Tehran, Iran ,
Abstract: (376 Views)
Aim and Introduction
The construction sector is one of the macroeconomic sectors that attracts a large amount of the country's liquidity every year. Investment in this sector is of paramount importance. Not taking into account the conditions of the investment field, possible events and influencing factors, actions and reactions of the market and society, when choosing construction projects, causes investors to have problems in reaching their goals. System dynamics is one of the most effective tools that provides the possibility to recognize and understand the laws governing the change processes of complex systems. Researches show that in Iran, especially in Tehran, the building and above all the housing as an economic commodity has characteristics that distinguish it from other commodities and complicate the analysis of supply and demand and market slow down. Therefore, the decision to invest in the construction sector can be considered a dynamic decision that various and different factors and variables are effective in this process. In this research, the dynamic simulation methodology of the system of investment in construction projects in Tehran has been analyzed and investigated which can be used as a support system for model-based decision.
Methodology
In terms of purpose, this research is exploratory and can be considered among applied research. The statistical population of the research includes experts who work in the field of building investment. To collect information, the library method and documents of investment companies in the field of construction have been used. The basic analytical method in this research is simulation using system dynamics methodology. Vansim software was used to model system dynamics.
Findings
The increase in real housing prices over the past years has been compared with the output of the simulation model. The results showed that these two values behave similar to each other. The error value of the model in the predicted value and the actual value is very small on average, which indicates the high accuracy of the model in predicting the behavior of the reference. The results of the simulation in the case where the population variable is unchanged and the birth and death rates are zero showed that after some time, the real demand will be zero and the number of available houses will reach a constant value, and the limit behavior of the model is as expected. The simulation results showed that in the case where the land price variable is very high, after some time, the real demand will be zero and the number of available houses will reach a constant value, and the limit behavio of the model is as expected. Therefore, since there is no demand, no houses will be built as a result. Based on the results of the simulation, the most important effects on investment tendencies in construction projects are based on price and profitability variables. With an increase in price, investment in construction increases, but on the other hand, an increase in price will result into increased capital demand. By reducing the capital demand to 5%, the price will decrease to a small amount and the investment in the construction projects will be significantly reduced. The reason for not reducing the price properly is the current inflation, which affects the price of land and other influencing factors. Based on this, the inflation reduction scenario was investigated. With a 15% decrease in inflation, we have seen a relatively significant price decrease and the investment rate has decreased very little. Therefore, the most important component in investment tendencies is the inflation rate and economic stability, the appropriate inflation rate causes a balanced process of price increase and balanced demand, and for this reason, investment is made with less risk, demand and proper profitability.
Discussion and Conclusion
In this research, various aspects of investment in construction projects have been studied with an analytical and multifaceted view. The simulation results showed that the price of building units and the price of land or old property will reach more than double the current value during the 5-year period of simulation. The annual real demand rate increases with a gentle slope from about 105 thousand cases to more than 117 thousand cases and then decreases to less than 84 thousand cases. The construction rate will be about 70 thousand units per year by the investors, and 116 thousand units per year will be invested during the 5-year period, which is due to the increase in capital demand. Based on this and taking into consideration the units demolished for renovation and some units removed from the service due to the exhaustion of the effector in demand and available within 5 years, in the end more than 400 thousand residential units will be added to the total construction units of the city. Based on the results and reports extracted from the simulation model, which shows the future conditions of the investment field of construction projects, along with the study of the performed scenarios, the decision makers can observe and check other changes in the system in case of changes in the variables. Eventually, fully informed decisions are recommended to be made based on investigations with a systemic approach
The construction sector is one of the macroeconomic sectors that attracts a large amount of the country's liquidity every year. Investment in this sector is of paramount importance. Not taking into account the conditions of the investment field, possible events and influencing factors, actions and reactions of the market and society, when choosing construction projects, causes investors to have problems in reaching their goals. System dynamics is one of the most effective tools that provides the possibility to recognize and understand the laws governing the change processes of complex systems. Researches show that in Iran, especially in Tehran, the building and above all the housing as an economic commodity has characteristics that distinguish it from other commodities and complicate the analysis of supply and demand and market slow down. Therefore, the decision to invest in the construction sector can be considered a dynamic decision that various and different factors and variables are effective in this process. In this research, the dynamic simulation methodology of the system of investment in construction projects in Tehran has been analyzed and investigated which can be used as a support system for model-based decision.
Methodology
In terms of purpose, this research is exploratory and can be considered among applied research. The statistical population of the research includes experts who work in the field of building investment. To collect information, the library method and documents of investment companies in the field of construction have been used. The basic analytical method in this research is simulation using system dynamics methodology. Vansim software was used to model system dynamics.
Findings
The increase in real housing prices over the past years has been compared with the output of the simulation model. The results showed that these two values behave similar to each other. The error value of the model in the predicted value and the actual value is very small on average, which indicates the high accuracy of the model in predicting the behavior of the reference. The results of the simulation in the case where the population variable is unchanged and the birth and death rates are zero showed that after some time, the real demand will be zero and the number of available houses will reach a constant value, and the limit behavior of the model is as expected. The simulation results showed that in the case where the land price variable is very high, after some time, the real demand will be zero and the number of available houses will reach a constant value, and the limit behavio of the model is as expected. Therefore, since there is no demand, no houses will be built as a result. Based on the results of the simulation, the most important effects on investment tendencies in construction projects are based on price and profitability variables. With an increase in price, investment in construction increases, but on the other hand, an increase in price will result into increased capital demand. By reducing the capital demand to 5%, the price will decrease to a small amount and the investment in the construction projects will be significantly reduced. The reason for not reducing the price properly is the current inflation, which affects the price of land and other influencing factors. Based on this, the inflation reduction scenario was investigated. With a 15% decrease in inflation, we have seen a relatively significant price decrease and the investment rate has decreased very little. Therefore, the most important component in investment tendencies is the inflation rate and economic stability, the appropriate inflation rate causes a balanced process of price increase and balanced demand, and for this reason, investment is made with less risk, demand and proper profitability.
Discussion and Conclusion
In this research, various aspects of investment in construction projects have been studied with an analytical and multifaceted view. The simulation results showed that the price of building units and the price of land or old property will reach more than double the current value during the 5-year period of simulation. The annual real demand rate increases with a gentle slope from about 105 thousand cases to more than 117 thousand cases and then decreases to less than 84 thousand cases. The construction rate will be about 70 thousand units per year by the investors, and 116 thousand units per year will be invested during the 5-year period, which is due to the increase in capital demand. Based on this and taking into consideration the units demolished for renovation and some units removed from the service due to the exhaustion of the effector in demand and available within 5 years, in the end more than 400 thousand residential units will be added to the total construction units of the city. Based on the results and reports extracted from the simulation model, which shows the future conditions of the investment field of construction projects, along with the study of the performed scenarios, the decision makers can observe and check other changes in the system in case of changes in the variables. Eventually, fully informed decisions are recommended to be made based on investigations with a systemic approach
Article number: 12
Article Type: Original Research |
Subject:
Urban, Rural, Regional, Real Estate, and Transportation Economics
Received: 2024/04/6 | Revised: 2025/02/18 | Accepted: 2024/05/12 | Published: 2025/02/18
Received: 2024/04/6 | Revised: 2025/02/18 | Accepted: 2024/05/12 | Published: 2025/02/18
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