A New Housing Development in the North Essex - Assignment Example

Case Study for a Property Development Company for considering building a new housing development in the North Essex Background & Terms of Reference Aproperty development company is considering building a new housing development in the North Essex area. The management of the company wants to undertake an analysis of the local housing market. For the above purpose the management of the company is currently considering three sites which are in Colchester, Mersea Island and Jaywick. This dissertation will aim to provide the company with the detailed logistics of proposing that property based on the economic and demographical situation of the areas under consideration. The points of reference will be the different types of property mix found in these areas, whether the property infrastructure differs between these areas, the cost comparison of different properties in these areas and any interesting aspect near these areas that can add value to the aforesaid property and finally what are the issues how the total pricing of a property may be considered. It is accepted fact in the Real Estate industry that the price of any property will vary with location; total carpet area, amenities and value additions like nearby supermarkets, swimming pool, and open space. Hence each variable must be considered while proposing a new establishment both for cost effectiveness and customer focus (Pagourtzi et al, 2003). The points of reference were: · Is there any difference in the types of homes available in these areas (type of property, number of bedrooms etc)? · How do the prices of properties in these areas compare? · How do the prices of different types of property compare? · The interesting aspects of the local housing market. Procedures Data Collection: We have considered housing properties in Colchester, Mersea Island and Jaywick and details were collected from http://www.rightmove.co.uk/.We selected 58 properties in Jaywick, 60 in Mersea Island and 59 in Colchester so a total of 178 properties were selected. The distribution was more or less equal. Statistical Interpretations For the above analysis and comparison t tests and ANOVAs were conducted and the p value was noted. The hypothesis was that if the p value is less than 0.05 it will mean that there is a significant difference between the observations and the observation has not taken place due to chance factors of random sampling and if the p value is more than 0.05 it will mean that there is a no significant difference between the observations and the observation has taken place due to chance factors of random sampling (Warne et al, 2012). Further a multiple regression equation was conducted to find how does pricing of a property relates with the various independent variables like bedrooms, parking space and others. The equation was done through the wessa software based on R programming language (Wessa, 2014).The coefficients of the variables will indicate the correlation of a particular variable with pricing and the sign convention will indicate whether pricing will increase with increased value of the independent variables or decrease with increased value of the independent variables. Since the locality value cannot be accommodated in the equation and neither the type of property so they were assigned dummy variables (Warne et al, 2012). These were 0 for Jaywick, 1 for Mersea Island and 2 for Colchester. Similarly Bungalow was assigned 1, Houses as 2 and Flats as 3. Findings Fig 1: Indicates average price of Bungalow in different localities. The above figure indicates that price of Bungalow in different localities vary significantly and is lowest in Jaywick and Highest in Colchester. Fig 2: Indicates average price of Houses in different localities. The above figure indicates that price of house in different localities vary significantly (but no difference between price of a house in Colchester and Mersea Island) but overall it is lowest in Jaywick and Highest in Colchester. Fig 3: Indicates average price of Flats in different localities. The above figure indicates that price of Flat in different localities vary significantly and it is lowest in Jaywick and Highest in Colchester. Average of price Column Labels       Row Labels Bungalow Flat House Grand Total Colchester 1.384307371 0.613653028 1.49997235 1.172740221 Jaywick 0.444085371 0.283206443 0.639896765 0.512811109 Mersea Island 1.141598019 0.420518657 1.424637086 1.301088044 Grand Total 0.713536982 0.560563004 1.273070162 1 Fig 4: The above table and graph summates the situation that Housing Property in Colchester area is costlier with respect to all the properties and on an average in all the areas that Bungalows are costlier than houses which are costlier than flats. Average of Number of bedrooms Column Labels Row Labels Bungalow Flat House Grand Total Colchester 3.333333333 1.857142857 3.71875 3.016949153 Jaywick 2.441176471 3 3.318181818 2.793103448 Mersea Island 2.833333333 1.5 3.681818182 3.366666667 Grand Total 2.634615385 1.888888889 3.612244898 3.062146893 Fig 5: Indicates that with respect to the number of bedrooms it cannot be specified to a particular type of property will have more or less bedrooms and the trend seems erratic. Average of price Column Labels Row Labels Bungalow House Grand Total detached 0.620050954 1.568067664 1.171448428 mobile 0 0.116264276 0.116264276 semi-detached 0.858199582 0.7842139 0.808875794 terrace 0 0.615969407 0.615969407 Grand Total 0.658932363 1.172291899 1 Fig 6 : Represents property valuation as per orientation. Fig 7: indicates the value of properties based on number of rooms . It is seen that 3 0r 4 bedroom properties are more preferred with lesser or more number of rooms. Fig 8: indicates the value of properties based on number of rooms increases linearly with the increase in number of rooms in Mersea Island but it is not a criteria for Jaywick or Colchester. Econometric Regression Equation In this equation Price is the housing price, Loc is locality, Typ means type of property, Bed means number of bedrooms, Par means number of parking space Multiple Linear Regression - Estimated Regression Equation Price[t] = +192082.69099364 Loc[t] -42580.420900889 Typ[t] +88554.94468116 Bed[t] +61905.064700518 Par[t] -239314.700791 + e[t] Multiple Linear Regression - Ordinary Least Squares Variable Parameter S.E. T-STAT H0: parameter = 0 2-tail p-value 1-tail p-value Loc[t] 192082.690994 19058.763277 10.078445 0 0 Typ[t] -42580.420901 23401.54779 -1.819556 0.070565 0.035283 Bed[t] 88554.944681 10521.390321 8.416658 0 0 Par[t] 61905.064701 11767.13953 5.260842 0 0 Constant -239314.700791 51712.262934 -4.627813 7.0E-6 4.0E-6 Variable Partial Correlation Loc[t] 0.609334 Typ[t] -0.137424 Bed[t] 0.540107 Par[t] 0.372299 Constant -0.332758 Critical Values (alpha = 5%) 1-tail CV at 5% 1.65 2-tail CV at 5% 1.96 Multiple Linear Regression - Analysis of Variance ANOVA DF Sum of Squares Mean Square Regression 4 8670858515444.2 2167714628861.1 Residual 172 5258428055842 30572256138.616 Total 176 13929286571286 79143673700.49 F-TEST 70.904634 p-value 0 The above regression equation is highly significant as the p value is 0 which is less than 0.05 that means the relation found in this equation has not happened due to chance factors of random sampling. The equation reflects that pricing of a property is positively correlated to a locality, number of parking space, number of bedrooms and the relation is highly significant. However it seems that there is no significant correlation of housing property with respect to type of property. The additional regression graph shows as the number of bedrooms increase property price increases. Conclusion Our analysis showed that price of Bungalow, Houses and Flats in different localities varies significantly and is lowest in Jaywick and Highest in Colchester. To plan a Bungalow property, House property or Flat property in Jaywick the prices could be fixed at 129365,186406 and 82500 respectively. To plan a Bungalow property, House property or Flat property in Mersea Island the prices could be fixed at 332555.4, 415006.66 and 122500 respectively. To plan a Bungalow property, House property or Flat property in Colchester the prices could be fixed at 403258.3, 436952.33 and 178761.4 respectively. The analysis reflects that Housing Property in Colchester area is costlier with respect to all the properties and on an average in all the areas that Bungalows are costlier than houses which are costlier than flats and the customers may be adapted to pricing in that locality. Finally the regression equation reflected that pricing of a property is positively correlated to a locality, number of parking space, number of bedrooms and the relation was highly significant. There was no significant correlation of housing property with respect to type of property. Thus if property has to be built in Mersea Island number of rooms should be a priority to fix the price but not in case of Jaywick or Colchester. Recommendations Hence to set up a new property focus of the company should be on locality, and the number of amenities with respect to number of bedrooms and number of parking spaces. These will be the most appealing factors to pay for the price of a particular property. Further as per as income group of the populations targeted any of the 3 sites may be selected. Colchester should be meant for the highest income group. References Pagourtzi, Elli et al.; Assimakopoulos, Vassilis; Hatzichristos, Thomas; French, Nick (2003). "Real estate appraisal: a review of valuation methods". Journal of Property Investment & Finance 21 (4): 383–401 Maliene, V. (2011). "Specialised property valuation: Multiple criteria decision analysis". Journal of Retail & Leisure Property 9 (5): 443–50 Warne, R. Lazo, M., Ramos, T. and Ritter, N. (2012). Statistical Methods Used in Gifted Education Journals, 2006–2010. Gifted Child Quarterly, 56(3) 134–149. Wessa, P. (2014), Free Statistics Software, Office for Research Development and Education, version 1.1.23-r7, URL http://www.wessa.net/ Read More