Boggo Road Property Market Risk Analysis - Business Plan Example

PROPERTY MARKET RISK ANALYSIS Name Institution Instructor Date Table of Contents 1.0 Executive Summary 3 2.0 Introduction 3 3.0 Site Information 4 3.1 Economic Indicators 4 3.2 Location 5 4.0 Major Development Proposal 6 4.1 Size 6 4.2 Nature 7 4.3 Construction 7 4.4 Operational Requirements 7 5.0 Market Research 8 5.1 Site and Local Setting 8 5.2 Demographic, Supply and Demand 11 5.3 Development Scenario 13 6.0 Competition Analysis 13 7.0 Feasibility of the Project/ Cash Flow 14 8.0 Risk Management 15 Sensitivity Analysis 15 9.0 Conclusion and Recommendation 15 References 18 Appendix One – Historical Document Information 19 1.0 Executive Summary The report consists of a site analysis of the location in which the project is to take place. The project will take place in the Boggo Road Urban Village on 9.5 hectares of land. The development project consists of the construction of residential and commercial apartments. This is due to increased demand of the facilities in the location. In addition, the rising population in the area also increases the demand of the constructions. The report also consists of a demographic market analysis, which focuses on the economic condition of the Boggo Road Urban Village during the past and in current economic times. This means that the report focus on the economic indicators in the Boggo Road Urban Village. Competitor analysis of the Boggo Road Urban Village in terms of commercial and residential buildings is also considered. This is crucial since it determines the cash flow that is projected from the project. Moreover, the report has also focused on the risks involved in managing the project in order to ensure increased financial returns and profitability. 2.0 Introduction The proposal for the Boggo Road Urban Village involves the construction of an urban village comprising of residences, retail and commercial. Included in the proposal is the development of a facility for environmental research and recreational facilities. It will contain open spaces and will incorporate the heritage listed Boggo Road goal buildings (Humphreys Reynolds Perkins 2007). The population of South East Queensland is predicted to grow from 2.8 million in 2006 to 4.4 million in 2031 (Department of Local Government and Planning 2009, p. 91). In order to accommodate this, the growth management program recognizes the need to accommodate high density development in an environmentally sustainable manner (Department of Local Government and Planning 2009). The project will be conducted in the chosen site since the site is seen as a potential economic site that determines the economic growth of the area. This report will analyse the various market conditions that are necessary in carrying out the proposed project. This will include conducting an analysis of the location and the site where the project will be carried out. This means that the site analysis of the Boggo Road Urban Village is crucial to the market analysis report. There are crucial elements of the construction which include luxurious residential apartments, commercial rooms, environment friendly site. The project is situated in an area that has a growing demand for apartments and commercial buildings. 3.0 Site Information 3.1 Economic Indicators An economic analysis was conducted in order to establish the various indicators of the Boggo Road Urban Village in order to determine ways in which the development will fit in the proposed environment. This economic analysis was done in regard to local economies as well as the global economies. This means that most of the economies including Australian economies are affected by the global financial crisis. However, since Australia depends mostly on trading with China, its demands of commodities in the international communities are likely to increase. Considering the unemployment rate, Australia has observed a decrease in the rate of unemployment. This means that the project will be able to tap a lot of income since the demand for apartment will increase with increase in income and employment. The lending rates in Australia have increased from 2009. This is likely to affect the consumer confidence such that the market of properties in Boggo Road may decrease. However, the lending rate in banks is likely to increase making it difficult for developers to secure loans from banks and other financial institutions. The demand for housing facilities in Australia have increased keeps on rising. This is attributed to increasing population size of the country. However, the approval of housing construction has stagnated for the past few years. This causes an increase in the cost of housing facilities. 3.2 Location The location of the Boggo Road Urban Village is east of Annerley Road in Dutton Park (Figure One). Figure One: Location of the Proposed Development (Source: Queensland Government 2011). It is bounded by Boggo Road, South Street and Annerley Road (Figure Two). Figure Two: Location of the Development (Source: Google Maps 2013). The location in close proximity to both road and rail transport networks meets the transportation requirements of the South East Queensland Regional Plan 2009 – 2031 (Department of Local Government and Planning 2009, p. 92). The site is also set high on a hill (Connell Wagner 2005). 4.0 Major Development Proposal 4.1 Size The site is 9.5 hectares in size (Figure One and Figure Two). The objective is to reintegrate the area back into the community after having served as a penal institution for just over one hundred years. 4.2 Nature The development proposal is seeking to create a focal point for the community that has traditionally expanded out from the transportation routes rather than from a central retail, commercial or industrial centre. There is a strong feeling in the cultural assessments of the community that the community is segregated on geographic and social parameters (Brecknock Consulting 2005). 4.3 Construction The design of the development is required to reflect sub-tropical design (HumphreysReynolds Perkins 2007, p. 4). This is so that local climatic conditions are considered in order to create environmentally efficient and sustainable development (Department of Local Government and Planning 2009, p. 93). The development will include accommodation targeted to the low and medium income groups. This demographic profile is prevalent in the area compared to Brisbane City (Table One). Table One: Income levels of Dutton Park compared to Brisbane City (Source: Brecknock Consulting 2005, p. 12). 4.4 Operational Requirements The proposed development is required to be environmentally and economically sustainable (Humphreys Reynolds Perkins 2007). It must protect the state heritage listed buildings on the site (Humphreys Reynolds Perkins 2007, p. 4). The development must include the Ecosciences Precinct project that is concerned with climate change and the protection of the environment (Humphreys Reynolds Perkins 2007, p. 4). The development must accommodate the South East Queensland Regional Plan 2009 – 20316 and the South East Queensland Infrastructure Plan 2005 – 2026. Under this plan, there is a requirement that developments have a minimum yield of 15 dwellings per hectare (Department of Local Government and Planning 2009, p. 91). 5.0 Market Research A market research of the site was done in order to determine the potential of development in this research it was considered that it is important to examine the historical development of the area in order to establish the demands of the residents in terms of housing facilities. In addition, the market analysis focused on the original settlers of the site. This was crucial in order to establish the trends of development in the area and determine whether there is the future growth of the site in order to establish the profitability of the project. 5.1 Site and Local Setting The proposed development is to be built on the site of the Boggo Road maximum security prison. The latitude and longitude of the site are -27.49567 and 153.03053 (Google Maps 2013). The site is within 4kms of the Brisbane CBD. The 9.49 hectare site comprises of the following lots: Lot 205 on SL809188 (4.15 ha); Lot 206 on SL809188 (4,849 m2); Lot 207 on SL809188 (1.288 ha); Lot 208 on SL809188 (2.088 ha); Lot 16 on CP885454 (8,238 m2); Lot 307 on CP886793 (6,507 m2). (Connell Wagner 2005, p. 1). Figure Three: Lot Plans of the Area (Source: Connell Wagner 2005, p. 46, p. 53 and p. 55). 5.2 Demographic, Supply and Demand A demographic research of the site indicates that about 41.1% of the residents are from overseas countries that come there to work. This means that the demand for commercial housing is still growing since most of the inhabitants are not the original people of the area. This means that there is still demand for housing facilities in the area. In addition, most the individuals on the site are working individuals who earn average incomes. Therefore, in construction of the facility, it is necessary to consider the occupation of the residents in order to rate the facilities at better pricing rates. Most of the housing facilities in the Boggo Road Urban Village are still costly such that local people are not able to afford the facilities. In addition, commercial houses are dominating the area as compared to residential houses. Hence the Boggo Road Urban Village is in short of residential house which implies that the demand is likely to increase. However, the construction of commercial housing facilities from other contractors has increased from the past few years from 2010. It is predicted that from 2006 to 2031, 754,000 additional dwellings will be needed to meet the anticipated population growth in southeast Queensland (Department of Local Government and Planning 2009, p. 9). As part of the South East Queensland Regional Plan 2009 – 2031 (Department of Local Government and Planning 2009, p. 90) compact and well planned communities with transit corridors are the stated requirements of urban development. The development is a transit oriented development. Associated with the Boggo Road development is the initiative of the State government to establish Queensland as a global leader in environmental issues (Queensland Government 2011). The aim is to establish a world class centre that will attract some of the world’s leading environmental researchers to tackle environmental issues (Queensland Government 2011). 5.3 Development Scenario Due to the employment rates of the project site there are different development scenario that can be considered in the location. This is because the individuals are getting different incomes in different sectors of the economy. Scenario 1. This will include 1 bedroom houses that will have a spacious parking ground which will total to about 20 units. Scenario 2. This will consist of 2 and three bedroom units that will take care individual with families. Scenario 3. This consists of 3 storey building with 3 bedroom units that will incorporate surrounding characters. However, based on the housing demands of the location, it is appropriate to include a mix of the scenarios in order to cater for different people at different socioeconomic status. This will also make it easier for the residents to purchase the houses at affordable rates. 6.0 Competition Analysis The potential competitors of the development project are other constructions which are underway while others are completed. The Ecoscience precincts and other constructions in the location are likely to offer competition in terms of commercial housing. The advantage of the projects that unlike the other facilities, this project will cover a wider area that will allow more residential accommodation and person to live in. In addition, the site is located in such a way that one can have a spectacular view of the city. This is likely to attract potential individuals who would wish to purchase the apartments of the project. 7.0 Feasibility of the Project/ Cash Flow A feasibility analysis allows the developer to be able to evaluate the ability of the project to generate the desired income within the shortest time possible. This means hat the feasibility analysis is conducted in order to determine the expected returns of the project. Considering the current housing demands and supply in Boggo Road Urban Village, the financial returns and cash flow from the project is expected to take approximately 25 months. This was done using the discounted cash flow system. 8.0 Risk Management This is done in order to establish the risks involved in the project. These include sensitivity and scenario analysis of the project in order to evaluate the success and feasibility of the project. Sensitivity Analysis This is done to determine the variations and their relationship to the costs of construction and the value of the property during the time of sale. It was established that increased cost of construction will result into a high sale value. This may affect the sale of the property hence take long time to realize expected returns. This also focuses on the variations and their relationship during the construction time. This establishes the relationship between cost of construction and duration of construction. In addition, it was also established that increasing the construction time would increase the costs of construction since workers will be paid more than the projected amount. Based on the scenario analysis and risk analysis, it is projected that the project will generate a good profit margin that will be able to cater for the cost of construction within the estimated time frame. 9.0 Conclusion and Recommendation The Boggo Road development demonstrates the benefits that can be achieved through blending the elements in the community, introducing new components and creating a rejuvenated urban environment. The Boggo Road development incorporates the historic and cultural past of the community within the plan. The proposal takes an area that has been in decline for twenty years and rejuvenates it. The plan incorporates the needs of the current socio-economic groups in the community and increases the residential needs of this group. The introduction of commercial and retail facilities provides additional employment opportunities in the community targeted to the prevailing medical orientation. The introduction of the ecoscience facility provides a new environmentally world class centre that enhances the profile of the community positively. The development will have long term benefits to a community that has suffered under the shadow of the prison and releases the community from this bondage. It is evident that from the report, there is an increase in the demand of housing facilities in the Boggo Road Urban Village. This is considering the fact that there are potential rent owner and potential buyer as indicated from the demographic data. This means that the construction of residential and commercial houses will be able to make high profits and the units may be able to sale even before the completion of the construction. Based on the feasibility analysis, it is safe and logical to continue with the construction project since it will be able to avoid high risks that may be encountered during the project. References Boggo Road 2011, The History of Boggo Road, viewed 1 June 2013, http://www.boggoroadjail.net/history.htm. Brecknock Consulting 2005, Cultural Audit: Dutton Park and Gair Park, Brecknock Consulting, Brisbane. Connell Wagner 2005, Contaminated Land Site History Report: Boggo Road Precinct, Department of Public Works, Brisbane. Department of Local Government and Planning 2009, South East Queensland Regional Plan 2009 – 2031, Queensland Government, Brisbane. Evans, R 2006, A History of Queensland, Cambridge University Press, New York. Google Maps 2013, Dutton Park. Humphreys Reynolds Perkins 2007, Boggo Road Urban Village Structure Plan, Connell Wagner, Brisbane. Queensland Government 2013, Boggo Road Urban Village at Dutton Park, viewed 1 June 2013, http://www.boggoroad.com.au/. Soils Surveys Engineering Pty Ltd 1999, Limited Environmental Site Assessment, OTEK Australia, Seventeen Mile Rocks. Appendix One – Historical Document Information (Source: Connell Wagner 2005, pp. 3 – 14) Read More

3.0 Site Information 3.1 Economic Indicators An economic analysis was conducted in order to establish the various indicators of the Boggo Road Urban Village in order to determine ways in which the development will fit in the proposed environment. This economic analysis was done in regard to local economies as well as the global economies. This means that most of the economies including Australian economies are affected by the global financial crisis. However, since Australia depends mostly on trading with China, its demands of commodities in the international communities are likely to increase.

Considering the unemployment rate, Australia has observed a decrease in the rate of unemployment. This means that the project will be able to tap a lot of income since the demand for apartment will increase with increase in income and employment. The lending rates in Australia have increased from 2009. This is likely to affect the consumer confidence such that the market of properties in Boggo Road may decrease. However, the lending rate in banks is likely to increase making it difficult for developers to secure loans from banks and other financial institutions.

The demand for housing facilities in Australia have increased keeps on rising. This is attributed to increasing population size of the country. However, the approval of housing construction has stagnated for the past few years. This causes an increase in the cost of housing facilities. 3.2 Location The location of the Boggo Road Urban Village is east of Annerley Road in Dutton Park (Figure One). Figure One: Location of the Proposed Development (Source: Queensland Government 2011). It is bounded by Boggo Road, South Street and Annerley Road (Figure Two).

Figure Two: Location of the Development (Source: Google Maps 2013). The location in close proximity to both road and rail transport networks meets the transportation requirements of the South East Queensland Regional Plan 2009 – 2031 (Department of Local Government and Planning 2009, p. 92). The site is also set high on a hill (Connell Wagner 2005). 4.0 Major Development Proposal 4.1 Size The site is 9.5 hectares in size (Figure One and Figure Two). The objective is to reintegrate the area back into the community after having served as a penal institution for just over one hundred years. 4.2 Nature The development proposal is seeking to create a focal point for the community that has traditionally expanded out from the transportation routes rather than from a central retail, commercial or industrial centre.

There is a strong feeling in the cultural assessments of the community that the community is segregated on geographic and social parameters (Brecknock Consulting 2005). 4.3 Construction The design of the development is required to reflect sub-tropical design (HumphreysReynolds Perkins 2007, p. 4). This is so that local climatic conditions are considered in order to create environmentally efficient and sustainable development (Department of Local Government and Planning 2009, p. 93). The development will include accommodation targeted to the low and medium income groups.

This demographic profile is prevalent in the area compared to Brisbane City (Table One). Table One: Income levels of Dutton Park compared to Brisbane City (Source: Brecknock Consulting 2005, p. 12). 4.4 Operational Requirements The proposed development is required to be environmentally and economically sustainable (Humphreys Reynolds Perkins 2007). It must protect the state heritage listed buildings on the site (Humphreys Reynolds Perkins 2007, p. 4). The development must include the Ecosciences Precinct project that is concerned with climate change and the protection of the environment (Humphreys Reynolds Perkins 2007, p. 4). The development must accommodate the South East Queensland Regional Plan 2009 – 20316 and the South East Queensland Infrastructure Plan 2005 – 2026.

Under this plan, there is a requirement that developments have a minimum yield of 15 dwellings per hectare (Department of Local Government and Planning 2009, p. 91). 5.

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