TL;DR – Amsterdam homes tend to increase in value over time. amsterdreams measures this value change and reflects it in the price of the AMS token. This means that if the value of homes increases, so does the value of the tokens that people have invested.
Capturing the growth of the housing market
amsterdreams has homes in the portfolio, bought by the money that people invested in AMS tokens. Here’s how that works. Historically, the value of homes has increased quite a lot, which is why it is attractive to invest in them, either to live in the home and build something, or just as a better way to make your savings work for you.
If you want to get an idea of how the value of Amsterdam homes has developed, look no further than this article. For investors to get a return on their investment, this value increase has to be reflected in the price of the AMS token. If a token cost 1,000 EUR last year and the average house price in Amsterdam has risen by 10% since then, you’d expect the token to now be worth 1,100 EUR. You could sell it and make 10% profit. Sweet! 😊
Actual value measurement
The simplest way to let AMS rise in value is to look at the average house prices, like in the report that this article is based on. However, we want to capture the real value of the homes that amsterdreams customers live in. For instance, if our homes are in a more fashionable neighbourhood where house prices are growing faster than the average, we want our investors to benefit from that. Also, we want to make sure that the value of the AMS in the world is adequately covered by the homes behind it, so the investment is stable.
To ensure both things, we look at the weighted average of square meter prices across the portfolio. We adjust this periodically based on new transactions and external valuations.
😵💫😵💫😵💫 Did we lose you? 😵💫😵💫😵💫
Not to worry, here is an example. First, let’s look at the square meter prices from an external source, in this case the quarterly report of Amsterdam realtor Hoen Makelaars, for the first quarter of 2022.
Now, let’s assume that amsterdreams has two homes, one in the south (Zuid) and one in Nieuw West. The home in Zuid is 100 m2 and the one in Nieuw West is 43 m2. For simplicity’s sake, let’s say they were both bought on the same day, when the value of AMS was exactly 1,000 euro.
| Home | Neigbourhood | m2 | Price € (day 1) | €/m2 date 1 | €/m2 date 2 | €/m2 date 3 |
| 1 | Zuid | 100 | 877,600 | 8,776 | ||
| 2 | Nieuw West | 43 | 229,276 | 5,332 | ||
What this means is that the portfolio value of amsterdreams on Date 1 is (877,600 + 229,276 =) 1,106,876 euro, which at 1,000 euro/AMS is also 1,106.876 AMS (notice the decimal point).
So far, so good. Now the next quarterly report of house prices comes out. Let’s assume the price in Zuid has increased by 2%, to 8,951.52 and the price in Nieuw West has risen more quickly, by 5%, to 5,598.6 euro per m2. Or:
| Home | Neigbourhood | m2 | Price € (day 1) | €/m2 date 1 | €/m2 date 2 | €/m2 date 3 |
| 1 | Zuid | 100 | 877,600 | 8,776 | 8,952 | |
| 2 | Nieuw West | 43 | 229,276 | 5,332 | 5,599 | |
What is now the total portfolio value? Well, it’s the square meters of the home multiplied by the new price. You can check for yourself that that is 1,135,957 euro. We gained almost thirty thousand euros in value in three months. Yay 🥳!
In AMS, the value is still 1,106.876 AMS. That means that the new AMS price is now (1,135,957 / 1,106.876 =) 1,026.273 euro on Date 2. Because of the weighted average, the rate of AMS has gone up by 2.6% over these three months.
Using actual house prices for a better AMS price
You’re still with us? Fantastic. Because we have another trick up our sleeve, better than average market prices, to make the value of AMS reflect the value of the houses.
Let’s say amsterdreams buys another home in Nieuw West. This one is 59 m2 and costs, on a certain date after Date 2, € 335,600. Quick math whizz 🤓 that you are, you figured out that this is 5,688 euro/m2. amsterdreams then uses that number for all apartments in, in this case, Nieuw West.
| Home | Neigbourhood | m2 | Price € (day 1) | €/m2 date 1 | €/m2 date 2 | €/m2 date 3 |
| 1 | Zuid | 100 | 877,600 | 8,776 | 8,952 | 8,952 |
| 2 | Nieuw West | 43 | 229,276 | 5,332 | 5,599 | 5,688 |
| 3 | Nieuw West | 59 | 335,600 | 5,688 |
For the value of AMS, this means on this Date 3 that the value of 1 AMS is built up as follows:
- Home 1, in Zuid, still has the same value of 100 m2 times the square meter price of 8,952.
- Home 2 is now valued at the new square meter price for Nieuw West, as is Home 3.
- Home 3 was bought before the new AMS rate took effect on Date 3, so when 1 AMS was still 1,026.273 euro. In other words, the price in AMS of this home was 327.02 AMS.
- The total amount of AMS in the portfolio is (1,106.876 + 372.02 =) 1,433.90 AMS.
- The total portfolio value is 895,200 in Zuid + 580,176 in Nieuw West = 1,475,376 EUR
- The value of 1 AMS is then the division of these numbers, so 1 AMS = 1,028.93, a modest increase to reflect the actually higher property value in Nieuw West.
Conclusion
You know what the best news is about all these numbers? That you don’t have to figure this out for yourself! 😅 amsterdreams will keep track of the house prices, square meter prices and the composition of the portfolio. In fact, we’ll adjust our house buying policy first of all to where our customers want to live, but also to where the value increases will be attractive to create a good return if you invest their money with amsterdreams.
We did want to share these mechanics with you, because as we always say: it’s your money!
A word to the wise
We put this bit of text at the bottom of every article on investing. Not in fine print and not because we have to. We want the best for you and don’t want to get you in trouble because you bought into something we said.
Investment comes with risk. Past returns do not guarantee future successes. amsterdreams provides you to the best of our ability with information to judge the risk and compare it to other ways of saving or investing, but we are human and we can also be wrong. Things could happen that we did not foresee.
You could lose part or all of your investment. So don’t invest money that you cannot afford to lose.
