Residential Property Development Feasibility Study – A Self-Fulfilling Prophecy?
Received Date: May 14, 2021; Published Date: June 14, 2021
Property development business is considered one of the most risky corporate activities due to its cyclicality and volatility [1,2]. It involves numerous risk factors [3-5] such as such as macroeconomic, social, urban-planning, political-legal, regulatory, environmental, and technological framework conditions [6,7]. Yet property developers are either “knowingly taking risks”  or making decisions without sufficiently understanding and analyzing risks , resulting in committing to projects based on arbitrary or speculative decisions, and ultimately causing project failures and financial losses . This short article reviews the three mainstream feasibility study methods and finds that the feasibility study adopted by the industry may require some further development. Especially, when the site value is determined by the residual value method, in-depth analysis is required to assess and capture the risk level associated with the future planning, construction, sales, and other key activities. An enhanced model is being developed based on artificial neural network method and empirical evidence to help developers better assess the project feasibility and site value at the time of the acquisition.