| | | 2015 | | 2014 |
At the beginning of the year | | 2,561,354 | | 2,535,854 |
Transfers from investment property under construction | 65,022 | | 114,467 | |
Investments | 237 | | 652 | |
Total investments | | 65,259 | | 115,119 |
Disposals | | (6,258) | | (116,394) |
Net gain (loss) from fair value adjustments on investment property (like-for-like) | 203,215 | | 32,536 | |
Net gain (loss) from fair value adjustments on investment property | 9,739 | | (5,761) | |
In profit or loss | | 212,954 | | 26,775 |
In other comprehensive income | | - | | - |
Transfers out of level 3 | | - | | - |
Total investment property (level 3) at the end of the year | | 2,833,309 | | 2,561,354 |
The Fund’s investment properties are valued by an external valuation expert on a quarterly basis. On 31 December 2015, these properties were revalued by independent professionally qualified valuation experts with experience in the locations and categories of the investment properties valued (level 3). The carrying values of investment property as at 31 December 2015, and 1 January 2015, are in line with the valuations reported by the external valuation experts. In estimating the fair value of the properties, the highest and best use of the properties is their current use. There has been no change to the valuation technique during the year and there were no transfers between levels 2 and 3 during the year.
The specifications of transfers from investments and Investment property under construction and also the disposals are set out below.
Investments and transfer from investment property under construction | 2015 | 2014 |
Randstad | 54,379 | 87,924 |
Mid East | 5,370 | 12,928 |
Brabantstad | 5,510 | 14,267 |
Non-core regions | - | - |
Total investments and transfer from investment property under construction | 65,259 | 115,119 |
Disposals | 2015 | 2014 |
Randstad | (5,497) | (68,312) |
Mid East | - | (4,297) |
Brabantstad | (117) | - |
Non-core regions | (644) | (43,785) |
Total disposals | (6,258) | (116,394) |
The significant assumptions made relating to the valuations are set out below.
2015 | | | | | |
| | Randstad | Mid East | Brabantstad | Non-core regions | Total |
Current average rent (€/unit) | 996 | 805 | 878 | 796 | 966 |
Estimated rental value (€/unit) | 1,021 | 823 | 903 | 813 | 976 |
Gross initial yield | 5.6% | 6.4% | 5.8% | 6.6% | 5.7% |
Net initial yield | 4.2% | 4.9% | 4.8% | 4.7% | 4.3% |
Current vacancy rate (no rental units) | 1.4% | 1.2% | 1.5% | 2.5% | 1.5% |
Current financial vacancy rate | 2.3% | 2.3% | 1.2% | 3.1% | 2.4% |
Long-term vacancy rate | 2.5% | 2.5% | 2.5% | 3.6% | 2.6% |
Long-term growth rental rate | 2.1% | 2.0% | 2.0% | 2.0% | 2.1% |
Average 10-year inflation rate (IPD Nederland) | | | | | 1.5% |
2014 | | | | | |
| | Randstad | Mid East | Brabantstad | Non-core regions | Total |
Current average rent (€/unit) | 968 | 785 | 856 | 781 | 927 |
Estimated rental value (€/unit) | 995 | 805 | 884 | 801 | 953 |
Gross initial yield | 5.9% | 6.7% | 6.0% | 6.7% | 6.0% |
Net initial yield | 4.2% | 4.8% | 4.4% | 4.7% | 4.3% |
Current vacancy rate (no rental units) | 2.0% | 1.1% | 1.8% | 3.4% | 2.1% |
Current financial vacancy rate | 3.2% | 2.7% | 5.3% | 5.2% | 3.5% |
Long-term vacancy rate | 3.4% | 3.9% | 3.1% | 4.8% | 3.5% |
Long-term growth rental rate | 2.5% | 2.4% | 2.3% | 2.3% | 2.4% |
Average 10-year inflation rate (IPD Nederland) | | | | | 1.9% |
The valuation of the investment properties has taken into account a vacancy period ranging from one (1) to three (3) months. There are no rental incentives.
The total gain (loss) for the year included an unrealised gain of € 213,877 (2014: € 43,865) relating to investment properties that are measured at fair value at the end of the reporting period.
The vacancy rate showed a downward trend due to successful efforts to improve letting in assets with the highest vacancy rate.
As at 31 December 2015, the Fund had unprovisioned contractual obligations for future repairs and maintenance of € 0.5 million (2014: € 2.7 million). Direct operating expenses recognised in profit or loss include € 0.4 million (2014: €0.5 million) relating to investment property that was vacant. Investment property includes buildings held under finance leases of which the carrying amount is nil (2014: nil).
Sensitivity analysis
The appraisal of the portfolio implies a net initial yield of 4.3% (2014: 4.3%). If the yields used for the appraisals of investment properties on 31 December 2015 had been 100 basis points higher (2014: 100 basis points higher) than was the case at that time, the value of the investments would have been 21.1% lower (2014: 18.9% lower). In this situation, the Fund’s shareholders’ equity would have been € 616 million lower (2014: € 499 million lower).
The table below presents the sensitivity of the valuation to changes in the most significant assumptions.
| | | 2015 | | 2014 |
Change rental rates | – 5% | 5% | – 5% | 5% |
Value of the investment property change | (162,808) | 118,346 | (131,965) | 131,965 |
| | | 2015 | | 2014 |
Change net initial yield | – 25 bps | + 25 bps | – 25 bps | + 25 bps |
Value of the investment property change | 173,537 | (154,602) | 163,453 | (145,439) |