lecture 2 (property management economics & planning)
TRANSCRIPT
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PROPERTY MANAGEMENT
ECONOMICS & PLANNING Siti Hasniza Binti Rosman
Universiti Teknologi MARA (UiTM)
THE GENERAL BUSINESS
ECONOMY
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MEANING OF BUSINESS ECONOMICS
Managerial economics is a science that deals with the application of various economic theories, principles, concepts and techniques to business management in order to solve business and management problems. It deals with the practical application of economic theory and methodology to decision making problems faced by private, public and nonprofit making organizations
According to Lord Robins, “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”.
CHARACTERISTICS OF BUSINESS ECONOMICS
Micro Economic Nature: Business Economics
is micro economic in its nature because it deals
with matters of a particular business firm only.
Use of Economic Theories: Business
Economics uses all economic theories relating to
the profits, distribution of income etc.
Realistic One: Business Economics is a realistic
science. It studies all matters concerning
business organization by considering the real
conditions existing in the business field.
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CHARACTERISTICS OF BUSINESS ECONOMICS
Normative Science: Business Economics is a
normative science. It studies the matters concerning the aims and objectives of a business firm. It determines the methods to be adopted for achieving such objectives. It also makes enquiry into the good and bad in decision making. Hence it is a normative science.
Macro-Economic Uses: Even though Business Economics has the nature of Micro-Economics, it also uses Macro-Economic approaches frequently. Certain matters in Macro-Economics like Business Cycles, National Income, Public Finance, Foreign trade etc. are essential for Business Economics. So, Business Economics uses the macro-economic phenomenon for taking business decisions.
CHARACTERISTICS OF BUSINESS ECONOMICS
Economics is a science or an art: It is considered
as science if it is a systemized body of knowledge
which studies the relationship between cause and
effect. Art is nothing but practice of knowledge.
Where as science teaches us to know and art teaches
us to do. It is science in which methodology and art
in its application
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IMPORTANCE OF BUSINESS ECONOMICS
Business economics is a useful subject. In fact it
is the most significant of all social sciences, Its
study is highly useful for analysing and
understanding the various economic problems.
DEFINITION THE REAL ESTATE ECONOMY
Real estate economics is the application of economic techniques to real estate markets.
It tries to describe, explain, and predict patterns of prices, supply, and demand.
The closely related field of housing economics is narrower in scope, concentrating on residential real estate markets, while the research of real estate trends focuses on the business and structural changes affecting the industry.
Both draw on partial equilibrium analysis (supply and demand), urban economics, spatial economics, extensive research, surveys, and finance.
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HOUSING DEMAND & SUPPLY SCENARIO
IN MALAYSIA
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Housing Stock in Malaysia Existing Stock (as at Q3 2013) 4,677,812 unit
Completion (Q3 2013) (e)* 18,427 unit
Total 4,696,239 unit
(e)* : Estimated
Source : NAPIC, as at Q3, 2013
unit
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Source : NAPIC/PPC Research
Housing Demand Volume & Value of Residential Property Transactions,
Malaysia (2010 - 2012)
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Unit RM Mil.
12 (e)* : Estimated
Source : NAPIC, as at Q3, 2013
unit
Incoming Supply (Q3 2013) (e)* 674,884 unit
Planned Supply (Q3 2013) (e)* 599,629 unit
Total 1,274,513 unit
Housing Supply in Malaysia
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High-rise30%
Landed70%
Supply of Residential Units by Type in Malaysia
Source: Property Stock Report Q32013
Housing Development
THE MANAGEMENT PLAN
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WHAT IS A MANAGEMENT PLAN?
A management plan is a blueprint for the way
your organization is run, both day-to-day and
over the long term.
It includes the standard methods for doing
various things such as handling money, dealing
with the actual work of the organization,
addressing the way people in the organization do
their jobs and the overall philosophical and
intellectual framework in which these methods
operate.
WHY DOES YOUR ORGANIZATION NEED A
MANAGEMENT PLAN?
It clarifies the roles and responsibilities of
everyone in the organization so that everyone
knows what she and everyone else is supposed to
do.
It divides the work of the organization in
reasonable and equitable ways, so that
everyone's job is not only defined, but feasible.
It increases accountability, both internally (when
something doesn't get done, it's obvious whose
responsibility it was) and externally (the better
the management of the organization, the better it
will serve the community).
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WHY DOES YOUR ORGANIZATION NEED A
MANAGEMENT PLAN?
It ensures that necessary tasks are assigned to
the appropriate staff members, and creates a
time schedule to get them accomplished.
It helps the organization define itself. By
developing a plan that's consistent with its
mission and philosophy, an organization can be
clear on what it believes in and communicate this
with clarity to its staff, its target population, and
the community as a whole.
PREPARATION OF MANAGEMENT
PLAN
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COMPONENTS OF A MANAGEMENT PLAN
1. Property information
This section simply provides a legal description (lot, concession, township, etc.) of the property, the acreage, and information (name, address, and telephone number) about the registered owner(s).
2. Property management history
The purpose of this section is to note what activities have taken place on the property (relevant to the management plan you are preparing). This may include past harvesting operations, change of objectives or ownership, planting projects, insect control, trail construction, etc.
COMPONENTS OF A MANAGEMENT PLAN
3. Maps
Good maps and/or aerial photographs of your
property are essential. Depending on the size of
your property you may require two sets of maps –
one showing your property in relationship to the
surrounding landscape and a map showing the
detailed features of your property.
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COMPONENTS OF A MANAGEMENT PLAN
4. Setting objectives
Prior to finalizing your objectives
Need to consider your financial resources, level of
knowledge, availability of time and the
characteristics of your property when making
this assessment.
COMPONENTS OF A MANAGEMENT PLAN
5. Preparing an inventory
Preparing an inventory of your forest is a very
important component of your plan. The better the
inventory information that you have, the better
decisions you can make. The amount of
information collected will depend on your
objectives and the activities you plan to
undertake.
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COMPONENTS OF A MANAGEMENT PLAN
6. Scheduling of activities
When preparing your schedule of activities you
should always be able to answer:
What – describe the activities to be undertaken;
Why – what objectives will these activities help
you to achieve;
Where – list the forest compartment where the
activities will take place and how many hectares
will be treated; and
When – what year and season will the work be
undertaken.
COMPONENTS OF A MANAGEMENT PLAN
7. Record of activities
The information that you collect can be used later
to update the property management history
section of your management plan.
It provides a link back to your objectives and it
provides a measuring stick to see how successful
the work you undertake today is in the future.
Record details of costs associated with work
completed, volumes and revenues generated from
your forest, which is a requirement if you are
operating as a business.
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COMPONENTS OF A MANAGEMENT PLAN
7. Record of activities
The information that you collect can be used later
to update the property management history
section of your management plan.
It provides a link back to your objectives and it
provides a measuring stick to see how successful
the work you undertake today is in the future.
Record details of costs associated with work
completed, volumes and revenues generated from
your forest, which is a requirement if you are
operating as a business.
COMPONENTS OF A MANAGEMENT PLAN
8. Review of Past Activities and Plan Update
An update of your inventory (i.e. in areas where
you have undertaken commercial harvesting);
A review of your objectives to ensure they are
still relevant; and
Preparation of a new schedule of management
activities for the next ten years.
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MARKET ANALYSIS
DEFINITION OF MARKET ANALYSIS
A market analysis studies the attractiveness and the
dynamics of a special market within a special
industry. It is part of the industry analysis and thus
in turn of the global environmental analysis.
Through all of these analyses the strengths,
weaknesses, opportunities and threats (SWOT)
of a company can be identified.
The market analysis is also known as a documented
investigation of a market that is used to inform a
firm's planning activities, particularly around
decisions of inventory, purchase, work force
expansion/contraction, facility expansion, purchases
of capital equipment, promotional activities, and
many other aspects of a company.
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DEFINITION OF MARKET ANALYSIS
The market analysis is one of the most
important parts of any startup strategy. Do it
right, and you will have a clear idea of the path
down which you are headed. A good market
analysis will enable you to lure investors,
sidestep pitfalls, and most importantly, attract
customers.
PROPERTY ANALYSIS
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REAL ESTATE MARKET ANALYSIS
Studies that Focus on the Market
Analysis of Local Economic Conditions
Study of the fundamental determinates of
the demand for all real estate in the market
Market Analysis
Study of the demand for a particular
property type
REAL ESTATE MARKET ANALYSIS
Studies that Focus on the Market
Marketability Analysis
Study of a specific development or property to assess
its competitive position
Studies That Focus on Individual Decisions
Feasibility Analysis
Evaluates a specific project as to whether or not it is
likely to be carried out successfully
Investment Analysis
Evaluates a specific property as a potential
investment. Investor specific.
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OVERVIEW OF MARKET ANALYSIS
COMPONENTS
The Study Process
What attributes does the subject property offer to
the market?
Who are the potential, typical users/most likely
purchasers of the subject?
Most Probable Buyer Analysis
OVERVIEW OF MARKET ANALYSIS
COMPONENTS
The Study Process
Is the property use needed?
Demand Analysis
Population Households Housing Units
Income Effective Buying Power Retail Sq. Ft.
Jobs % Use Office Office Sq. Ft.
Jobs % Use Industrial Industrial Sq. Ft.
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OVERVIEW OF MARKET ANALYSIS
COMPONENTS
What is the Competition?
Supply Analysis
Analysis comparing demand and supply
Equilibrium Analysis
How much rent can be charges?
Is the location competitive?
Are the property attributes competitive?
How much of the demand can be captured?
OVERVIEW OF MARKET ANALYSIS
COMPONENTS
Subjects marketability
Capture Analysis
Does the subject make financial sense?
Is it a good investment?
What is its market value?
Is the property’s value more than its cost?
I.e.: is there any entrepreneurial reward for the risk?
Feasibility Analysis and/or Highest and Best Use
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STEP 1: DEFINE THE PRODUCT
PROPERTY PRODUCTIVITY ANALYSIS
A. Physical Attributes
B. Legal and Regulatory Attributes
Private
Public
C. Location Attributes
Identification of economic attributes – the
association between land uses and their
linkages
Identification of the movement of demand in
relation to the direction of urban growth
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STEP 1: DEFINE THE PRODUCT
PROPERTY PRODUCTIVITY ANALYSIS
Analysis of Urban Growth Structure
Pattern, Direction and Rate
Analysis of factors influencing urban growth
structure
Natural, Manufactured and Political
Identification of competition and
comparison of location advantages and
disadvantages between competition and
subject
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STEP 1: DEFINE THE PRODUCT
PROPERTY PRODUCTIVITY ANALYSIS
D. Market appeal Attributes:
Identification of specific features such as
design or amenities that appeal to market
participants
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STEP 2: DEFINE THE USERS MARKET
DELINEATION
A. Market area concepts
Time-distance concepts
Area over which equally desirable, substitute
properties tend to compete with the subject
B. Geographic Market Delineation
C. Identification of Characteristics of Most
Probable User (consumer profile)
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STEP 3: FORECAST DEMAND FACTORS
A. Major demand types
Population creates households
Income creates retail buying power
Employment creates office and industrial users
B. Tastes and preferences: behavioral, motivational, and psychological factors
C. Demand segmentation
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STEP 4: INVENTORY AND FORECAST
COMPETITIVE SUPPLY
A. Existing stock of competitive properties
B. Potential competition Proposed construction
Probable additional construction
C. Factors influencing completion of potential competition
Land availability and costs
Interest Rates
Material and labor costs
Entrepreneurship
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STEP 5: ANALYZE THE INTERACTION OF
SUPPLY AND DEMAND
Residual Demand Study
A. Competitive environment
B. Residual Demand Concepts
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STEP 6: FORECAST SUBJECT CAPTURE
A. Capture rate and absorption period for subject
property
B. Risk Analysis
C. Reconciliation of market analysis and conclusions
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REFERENCES
DiPasquale, D. and W. Wheaton. 1996. Econometric Analysis of Office and Industrial Markets. Chap. 12 in Urban Economics and Real Estate Markets. Englewood Cliffs, NJ: Prentice Hall
Dixit, A. K. and R. S. Pindyck. 1994. Investment under Uncertainty. University Press: Princeton, NJ.
Featherstone, J. B. 1986. Approaching Market Analysis in a New Economic Environment. The Journal of Real Estate Development, 1, 5-10.
Hendershott, H. and R. Haurin. 1988. Adjustments in the Real Estate Market. AREUEA Journal, 16:2, 343-353.
Rosen, K. and L. Smith. 1983. The Price Adjustment Process for Rental Housing and the Natural Vacancy Rate. American Economic Review, 73, 779-786.
Sivitanides, P. 1997. The Rent Adjustment Process and the Structural Vacancy Rate in the Commercial Real Estate Market. The Journal of Real Estate Research 13: 195-209.
http://ctb.ku.edu/en/table-of-contents/leadership/effective-manager/management-plan/main
http://www.communitiescommittee.org/pdfs/mgmt_plans/web_man_plan.pdf
THANK YOU