Is Smart Housing a Good Deal? An Answer Based on Monte Carlo Net Present Value Analysis

Abstract

The smart cities are considered to be an engine of economic and social growth. Most countries started to convert their existing cities into smart cities or construct new smart cities in order to improve the quality of life of their inhabitants. However, the problem that facing those countries while applying the concept of smart cities is the costs, especially for the residential sector. Despite the high initial and even operation costs for adopting different technologies in smart housing; the benefits could exceed those costs within the lifespan of the project. This article is shedding the light on the economics of smart housing. This study aims to evaluate the net present value (NPV) of a smart economic housing model to check the viability and feasibility of such projects. The calculation of the NPV based on Monte Carlo simulation provides an interesting methodological framework to evaluate the robustness of the results as well as providing a simple way to test for statistical significance of the results. This analysis helps to evaluate the potential profitability of smart housing solutions. The research ends up by proving the feasibility of this type of project.

Upgradation of Metering Infrastructure of Low Voltage Distributed Network in Nottingham Road, Kwa-Zulu Natal, South Africa

“…In [31] the influence of smart grids on the electrical distribution networks is analyzed, highlighting the differences in implementing smart meters in developed and developing states. [32] demonstrates the cost of executing smart housing technology, and regardless of the initial greater costs, the advantages could potentially compensate expenses in the lifespan of the project. Using NPV (Net Present Value) of the smart economic house model, this study found positive NPVs for all meters, demonstrating the feasibility of the solution.…”

“…To ensure the feasibility study's reliability, it is crucial to analyze the time value of money. To assess the project's individual profitability, the NPV calculation is employed, which involves estimating future cash flows over a specified time frame [32].…”

Towards energy efficiency: retrofitting existing office buildings using smart technologies

“…The economic viability and feasibility of using smart technologies in buildings are an issue discussed by many studies. Despite the high initial cost of smart technologies compared to the conventional ones, the benefits could exceed those costs within the lifespan of the project [12]. The initial cost, energy savings, and payback period of smart buildings technologies vary widely across technology and building types.…”

Moving towards a Smarter Housing Market: The Example of Poland

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