RESIDENTIAL DEVELOPMENT: A FEASIBILITY ANALYSIS

Abstract

The residential property market is not dead - in fact, it has settled down to a "healthy" state. After a five-year fall, the outlook for investors of property in most sectors in Singapore has taken on a more rosy tinge. Evidence of increased level of real estate transactions and the rising trend of property prices especially in the residential sector reveal that the real estate market is most likely to enjoy a marked recovery with improvement in all sectors, with residential property showing the greatest average increase in value. Buyers are more confident that "the worst is over? and better prepared to make major financial decisions. This is due, in part, to :- ? FAVOURABLE interest rates for housing loans; ? LOW inflation; ? NEW CPF rules; ? BANKS' more liberal lending policies for home buyers; ? NARROWER price gaps between Housing Board flats and private apartments; and ? FEELINGS of improved job security among some people. Property developers are hopeful this year as it is generally believed now that the local property market has bottomed out of the slump and is headed for recovery. They are optimistic that they would reap substantial profits on new projects undertaken during this period. However, with the growing scale and magnitude of development in real estate coupled with the element of risk inherent in all investment projects, investment decisions become more complex and vital. Therefore, in order to eliminate the risk factor and to minimise the cost of failure, a development proposal should be accompanied by a comprehensive feasibility analysis. Very briefly, this dissertation serves to illustrate the importance of a feasibility analysis in making a good investment decision by way of a case study.