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KULIAH 3
(8 October, 2011)
PEMBANGUNAN TANAH SEBAGAI PELABURAN
(LAND DEVELOPMENT AS AN INVESTMENT)
EKONOMI PEMBANGUNAN
SBC 3453
1
SCHOOL OF PROFESSIONAL & CONTINUING EDUCATIONJabatan Ukur Bahan
Fakulti Alam BinaUniversiti Teknologi MalaysiaSEMESTER 1, SESSI 2011/2012
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PEMBANGUNAN TANAH SEBAGAI PELABURAN
(LAND DEVELOPMENT AS AN INVESTMENT)
2
Tanah
Pembangunan
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PLANNING & DEVELOPMENT
MODULE
KEMAJUAN KULIAH
L4, L5,L6 & L7
Development Planning
Development ProcessDevelopment Control
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PLANNING MODULE(Economics of Planning)
Investment in
Property Development
Economics of Land Use
Property as Economic Commodity
Investments in Property
Characteristics of Property
Investment Objectives
Property Investors Market Study
Economics of
Property Development Property in Economic Context
Construction as Factor of Production
Construction Value Chain
Construction Products
Business Enterprise
Property Market
Introduction to
Development Economics Economic Fundamentals
Economic Issues
Property & Construction Economy
Economic Transformation
Government Intervention
ECONOMIC MODULE
7 OKT. 11
L3
L2
L1
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Jack Harvey, Urban Land Economics : The Economics of Real Property.Lean & Goodal, Aspects of Land Economics.
David Cadman & Leslie Austin Crowe, Property Development.David C. & Rosalyn T (1998). Property Development.Alan W. Evans , Urban Economics.
Textbooks on Economics
Bahan Rujukan & Bacaan.
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INTRODUCTION
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The term Economics refers both to anintellectual discipline and to a
profession.
LAND ECONOMIC ISSUES
Bui ld ing Economis t
Const ruc t ion Econom is t
Development Econom ist
Construc t ion, locat ion,usage Bu i l t Ass ets
(Bui ld ings)Project
Delivery
system
The intellectual discipline of economics is an attempt to understand the
Processesthat govern the Production, Distribution and Consumption of Wealth.
1) Ability to advise clients on how to
develop the potential of their property.
2) Assist Property Owners to realise
development opportunities.
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LECTURE CONTENT
5 Property as an Economic Commodity
6 Characteristics of Property
7 Property Investment Market
8 Investments in Real Property
9 Property Market Study
MARKET ECONOMY
PELABURAN
Dalam
TANAH
Land Use
Land
Improvement
KANDUNGAN KULIAH
KULIAH 3
7REAL PROPERTY
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Land Economicsconcerns with the study of land use, natural
resources, public utilities, housing, and urbanlandissues.
The techniques of ECONOMICS have been applied to many different
ACTIVITIES, leading to the development of a wide range of SUB-DISCIPLINES.
LAND ECONOMIC ISSUES
Design,
construct ion,
Development
Land
Design
Bui ld ing
Const ruct ion
Ass et management
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Development Economist
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What is a market economy?
How do you relate to the property industry?
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PROPERTY MARKET ECONOMY
MARKET ECONOMY
Foundations (rights)of free market economy:
Private Property
Earn and keep profits
Freedom of competition (Enterprise)
Freedom of choice
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MARKET SYSTEMMarket determines product prices and
output through forces of supply and
demand:
a. Supply: Qty of goods/services businessesare willing to sell at different prices at a
specific time (seller, producer, or business)
b. Demand: Qty of goods/services
consumers are willing to buy at different
prices at a specific time (buyer, or consumer)
MARKET ECONOMY
Foundations (rights)
of free market economy:
Private property
Earn and keep profits
Freedom of competition (enterprise)
Freedom of choice
S
S
D
D
QUANTITY
RM(PRICE)1
PROPERTY MARKET ECONOMY
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MARKET SYSTEM
Market determines product prices and
output through forces of supply and
demand:
a. Supply: Qty of goods/services businesses
are willing to sell at different prices at a
specific time (seller, producer, or business)
b. Demand: Qty of goods/services
consumers are willing to buy at different
prices at a specific time (buyer, or consumer)
MARKET/EQUILIBRIUM POINT:The price and qty combination where supply
equals demand
a. market forces eliminate surplus or shortage
b. supply, demand, and equilibrium only existin a market (capitalist) system
MARKET ECONOMY
Foundations (rights)
of free market economy:
Private property
Earn and keep profits
Freedom of competition (enterprise)
Freedom of choice
S
S
D
D
QUANTITY
RM
(PRICE)
EQUILIBRIUM
1 2
PROPERTY MARKET ECONOMY
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MARKET SYSTEMMarket determines product prices and
output through forces of supply and
demand:
a. Supply: Qty of goods/services businesses
are willing to sell at different prices at a
specific time (seller, producer, or business)
b. Demand: Qty of goods/services
consumers are willing to buy at different
prices at a specific time (buyer, or consumer)
MARKET/EQUILIBRIUM POINT:The price and qty combination where supply
equals demand
a. market forces eliminate surplus or shortage
b. supply, demand, and equilibrium only existin a market (capitalist) system
COMPETITIONThe rivalry among businesses to
convince consumers to buy their
goods/services
degrees of competition (marketmodels):
1. Perfect Competition: numerous
sellers, standard product
2. Monopolistic Competition: many
sellers, product differentiation
3. Oligopoly: few sellers,
interdependence,
4. Monopoly: one seller, one product,
MARKET ECONOMY
Foundations (rights)of free market economy:
Private property
Earn and keep profits
Freedom of competition (enterprise)
Freedom of choice
S
S
D
D
QUANTITY
RM(PRICE)
EQUILIBRIUM
1 2
3
PROPERTY MARKET ECONOMY
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Factors of Production(basic resources):
LAND (natural resources)
labour (physical human resource
capital (man-made equipment, etc.)
entrepreneurshipknowledge (human capital)
PROPERTY
(REAL PROPERTY)
PROPERTY IN CONTEXTS OF ECONOMICS
LAND
MARKET ECONOMY
Private Property Market System
Market Equilibrium
Competition
EC ONOMICS DEVELOPMENT
Products Properties
Supply/Demand Construction
Pricing Property Prices
Market Property Market
Competition Among Developers
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Why do cities exist?
Why not a uniform
distribution of people acrossthe landscape?
1. Comparative Advantage
2. Internal Scale Economies
3. Agglomeration Economies
1. Its efficient utilization and the markets in which it
operates involving many and complex economic
and policy issues.
2. A proper understanding of the real estate market
is important for :
Individuals to make sound investment
decisions,
Businessesto make the right decision on
whether to buy or lease a property, and
Banks to evaluate the asset risks underlying
their mortgage loan portfolios and to innovate
real estate related financial products.
An Analytical Framework by which students canmake sound real estate investment decisions
URBAN LAND USE
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Understanding of :
the way the land market operates and of the economics of planning,
Understand onplanning policies and other policies which affect the
property market and to betterpredictboth the effects of those
policies and of other events affecting the market, particularly as they
affect the process of property development.
Locational
Choices
Office Zone
Residential Zone
Manufacturing Zone
URBAN LAND USE
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Multiple Land Use Rent Gradient
Office
zone
Manufacturing
zone
Residential
zone
Distance to City Center
Rent
Office Bid
Rent
Manuf. Bid
Rent
Residential
Bid rent
U U
URBAN LAND USE
RM 7.00psf
RM 1.50psf
RM 5.00psf
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THE ECONOMICS OF LAND USE
LAND ECONOMY
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Understanding of,
The economic functioning of the land market and,
The economics of the land use planning system
LAND ECONOMY draws on the disciplines of law, economics and finance
in the analysis of the use, management and development of land,
property and the environment within both the private and the public
sectors.
LAND treated as a Factor of Production
Factors Of Production = labour, land, and capital
LAND ECONOMY
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LAND ECONOMICS
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Land Economics is dedicated to the study of land use, natural
resources, public utilities, housing, and urban land issues.
The study of land lead to the study of how labour and capital areused with landto produce goods and services.
Land economics involve labour economics, public finance and every
possible field of economic study.
LAND ECONOMICS
Established in 1925 by the renowned economist Richard T. Ely
publishes innovative, conceptual and empirical research of direct
relevance to economists
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LAND ECONOMICS
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The Economics Consequences of Laws related to land use.
(What are the Consequences of Laws on Land Development?)
Each issues brings the studies on such topics as transportation,
energy, urban and rural land use, housing, environmental
quality, public utilities and natural resources.
If also focus on Peculiar Characteristics of Land such as NonTransferability of Land geographically, its durability , and use
over time (Refer Lecture 2).
LAND ECONOMICS
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PROPERTY AS AN ECONOMIC COMMODITY
PROPERTY AS AN ECONOMIC COMMODITY
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Property involves the concepts of right
Different persons can have different rights over the same property. In real property the right of ownerships is
often separated from the rights to use
Where there is a separation of rights, there is need for a written instrumentsto record and define the rights.
The markets in real property deals in these RIGHTS RELATING TO PROPERTYrather than the land and buildings themselves
It Is these rights and interest in real property which are the COMMODITIES
bought and sold in the real property market
PROPERTY AS AN ECONOMIC COMMODITY
REAL PROPERTY
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CHARACTRISTICS OF PROPERTY
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CHARACTRISTICS OF PROPERTY
Each Property has Different Characteristics Location, Types, Design
Durable(60 years)
Various Interest ( freehold, leasehold, access, air space, lights, etc) Capital Value is much higher when compare with commodities
Supply Is Limited. Cannot increase in size, numbers, heights, etc
Acquired for Investment Purposes.
High Cost of development and management.
Regulated by numerous Legislations
ALTERNATIVES CONSUMPTION (USE)
Owning & Using
Owning & Not using
Using & Not Owning
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Rights
Real Property
Property/Building
(Product)
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PROPERTY AS AN INVESTMENT
PROPERTY INVESTMENT
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Principle of Investment
The investment Market (Pasaran Pelaburan)
The nature of an investment is the giving up of a capital sum in return
for an incometo be received over time.
PROPERTY INVESTMENT
The Income is received as a periodic
Capital Sum
(Jumlah Modal)
(Returns on Investment)
PROPERTY INVESTMENT
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Purchasing or Renting a given Property
When purchasing it is an investment-Giving a Capital Sum which will save
him playing rent in future
His incomeis equal to the rent he would have to payand receiving it in a
non monetary from in the use of the property
If he rents, someone else receiving periodic payments for his capital value
of purchases price.
PROPERTY INVESTMENT
Rental Saved
(Income)Purchase (Buy)
Capital Sum
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INVESTMENT OBJECTIVES
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INVESTMENT OBJECTIVES
STAKEHOLDERS OBJECTIVES
Investors Profits/Returns on Investment
Contractors Production (Construction) Profits
Authorities Direct Involvement For Public Interest
(Social Profits: Social Benefits).
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Bui ld ing Economis t
Construct ion Economist
Development Econom ist Ability to advise clients on how to
develop the potential of their property.
Assist Property Owners to realise
development opportunities.
SLIDE 3
INVESTMENTS IN REAL PROPERTY
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INVESTMENTS IN REAL PROPERTY
Objectivein Investment : To preserve or enhance the real value of the assetand
receive a flow of income over time
Classification of Investment Characteristics
Freehold: Owner Occupier/Investor
Purchased property as an investmentFull financial risks
Rent Increase (inflation/scarcity) Gains
Rent Decrease ( Deterioration/Competition) Looses
Shops, offices, residential, industries
Leasehold: Freeholder rent property he owns to somebody else (Grant a Lease)For Fixed number of years for a Capital Sum/Rent
This Lease has value and can be exchanged in a market
Mortgages : Long term financial loans secured to a real property with interest payments.
Capital is repaid (Housing Loan).
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(Asset Management, Building Management, Facilities Management)
(Return on Investment)
INVESTORS IN REAL PROPERTY
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PROPERTY INVESTORS
1 PrivateIndividuals
Purchase (house) or rent (Shop) a property
Owner Occupier
Full Equity interest
Derive income from use of property
limited fund, small investors
2Property
Companies
Development Companies
Undertake property projects
Highly geared (Loans)Specialise in Residential, Commercial & Industrial properties
3Property
Companies
Operate Unit Trusts (Amanah Saham)
Uses Fund to buy shares in property companies
Avoid management commitment
4Pension FundInsurance Co.
Owned Properties Directly (High Quality)Direct Investment in Property
Retain Value (Hedged against inflation)
5Charities
Trusts.
Retain The Real value of a Trust Funds
Pay No Income Tax
Cannot invest entirely in securites (stocks)
Property as an Investment Portfolio
INVESTORS IN REAL PROPERTY
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PROPERTY MARKET STUDY
MARKET STUDY
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Market Study
Purpose :
1. To determine the nature and types of property market during
a particular time.
2. Focus on one type of development on a particular location.
3. To determine whether there is a demand to the present supply or
to the proposed Project
MARKET STUDY
1. 2010, 2011, 2012
1. Ipoh , Kuan tan , Sibu1. Ter race Houses , Condomin ium
1. Resident ial , Commerc ia l, Mixed Developm ent
1. Cur ren t Pro jec ts
2. New Projec ts
3. Presen t Hous ing Stoc
1. Popu lat ion , Market Segment
1. You r Development
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MARKET STUDY
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MARKET STUDY
Market Study in Important Under The Following Conditions
1 When the developer implementing a project has no experience
2 Uncertain market conditions
3 Entering a new market without much evidence
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MARKET STUDY
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MARKET STUDY
Market Study Consider 3Factors :
1) GENERAL FACTORS on The overall property
market
2) Factors on a SPECIFIC DEVELOPMENT
3) Factors on SPECIFIC LOCATION
Location of SiteNature of Site
Availability of Infrastructure
Local Demand
Local Authorities
Climatic Condition
Residential
Commercial
Mixed Development
Industrial
State of The EconomyFunding Availability
Population
Market Trend
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CASE : PROPERTY INVESTMENT
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PROPERTY
INVESTOR
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A
B
D
C
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TYPES OF
DEVELOPMENT
REAL PROPERTY
(BUILT ASSETS)LAND-USE
PROJECT
DELIVERYENTERPRISES
REAL PROPERTY
(RIGHTS)
Development Econom ist
(Return o n Investm ent)
Bui ld ing Economis t(Design & Procu rement
Eff iciency. Value for Mo ney)
Construct ion EconomistCons tr uc tab il it
Land Economist
Urban Economist
(Land-Use Eff iciency)
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END OF LECTURE 3
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