PROPERTY DEVELOPMENT : A MARKET ANALYSIS

Abstract

Property development is not carried out in a static environment. The interplay of free market forces, government control, investors' attitudes and other constraints on property create a climate of ever present changes and transitions in investment activities. Such inherent imperfections of the property market, coupled with the diverse objectives of different investor-groups and a host of other market determinants render property investment analysis a complicated yet interesting task. This dissertation seeks to, firstly, identify the various categories of local investors who are actively involved in property development and secondly, to ascertain the extent of influence that market forces have on their development decisions and activities. To achieve these two objectives, this study commences with a theoretical background of the framework for property development in Singapore, followed by a profile of the main investor-groups - individuals/non-profit organisations, property-based investors and non property-based investors. A sample survey is carried out on the most prominent group of non property-based investors to bring out their views as regards market forces, government control and criteria for development activities. And for a more balanced analysis, the interplay of such factors as economic growth, credit facilities, return rates, costs, etc, with observed development activities in the market is evaluated for a more thorough study. It is found that in addition to grabbling with the many complexities of market conditions, the investors have to be aware of the many constraints posed by planning and building controls and legislations governing property development. The considerations pertaining to profits as against costs and risks, credit facilities and financing are made more complex by the cyclical changes in demand and supply conditions. Profitability and security of a proposed development are major factors that continue to guide investors in decision making. And they are influenced, to a large extent, by economic performance and demand trends in the market. From the analysis, it is concluded that the commercial sub-market is most susceptible to changes in market conditions; and that although the scope of government control is extensive in Singapore, such control has not unduly fettered the free market mechanism within which investments in property continue to flourish.