Holding and opportunity cost theory in a property development context

This paper focuses on the varying approaches and methodologies adopted when the calculation of holding costs is undertaken, focusing on greenfield development. Whilst acknowledging there may be some consistency in embracing first principles relating to holding cost theory, a review of the literature reveals considerable lack of uniformity in this regard. There is even less clarity in quantitative determination, especially in Australia where there has been only limited empirical analysis undertaken. Despite a growing quantum of research undertaken in relation to various elements connected with housing affordability, the matter of holding costs has not been well addressed regardless of its part in the highly prioritised Australian Government’s housing research agenda. The end result has been a modicum of qualitative commentary relating to holding costs. There have been few attempts at finer-tuned analysis that exposes a quantified level of holding cost calculated with underlying rigour. Holding costs can take many forms, but they inevitably involve the computation of “carrying costs” of an initial outlay that has yet to fully realise its ultimate yield. Although sometimes considered a “hidden” cost, it is submitted that holding costs prospectively represent a major determinate of value. If this is the case, then considered in the context of housing affordability, it is therefore potentially pervasive.

The conceptualisation, sensitivity and measurement of holding costs and other selected elements impacting housing affordability (Literature review and research methodology for confirmation of PhD candidature)

It is widely held that strong relationships exist between housing, economic status, and well being. This is exemplified by widespread housing stock surpluses in many countries which threaten to destabilise numerous aspects related to individuals and community. However, the position of housing demand and supply is not consistent. The Australian position provides a distinct contrast whereby seemingly inexorable housing demand generally remains a critical issue affecting the socio-economic landscape. Underpinned by high levels of immigration, and further buoyed by sustained historically low interest rates, increasing income levels, and increased government assistance for first home buyers, this strong housing demand ensures elements related to housing affordability continue to gain prominence. A significant, but less visible factor impacting housing affordability – particularly new housing development – relates to holding costs. These costs are in many ways “hidden” and cannot always be easily identified. Although it is only one contributor, the nature and extent of its impact requires elucidation. In its simplest form, it commences with a calculation of the interest or opportunity cost of land holding. However, there is significantly more complexity for major new developments - particularly greenfield property development. Preliminary analysis conducted by the author suggests that even small shifts in primary factors impacting holding costs can appreciably affect housing affordability – and notably, to a greater extent than commonly held. Even so, their importance and perceived high level impact can be gauged from the unprecedented level of attention policy makers have given them over recent years. This may be evidenced by the embedding of specific strategies to address burgeoning holding costs (and particularly those cost savings associated with streamlining regulatory assessment) within statutory instruments such as the Queensland Housing Affordability Strategy, and the South East Queensland Regional Plan. However, several key issues require investigation. Firstly, the computation and methodology behind the calculation of holding costs varies widely. In fact, it is not only variable, but in some instances completely ignored. Secondly, some ambiguity exists in terms of the inclusion of various elements of holding costs, thereby affecting the assessment of their relative contribution. Perhaps this may in part be explained by their nature: such costs are not always immediately apparent. Some forms of holding costs are not as visible as the more tangible cost items associated with greenfield development such as regulatory fees, government taxes, acquisition costs, selling fees, commissions and others. Holding costs are also more difficult to evaluate since for the most part they must be ultimately assessed over time in an ever-changing environment, based on their strong relationship with opportunity cost which is in turn dependant, inter alia, upon prevailing inflation and / or interest rates. By extending research in the general area of housing affordability, this thesis seeks to provide a more detailed investigation of those elements related to holding costs, and in so doing determine the size of their impact specifically on the end user. This will involve the development of soundly based economic and econometric models which seek to clarify the componentry impacts of holding costs. Ultimately, there are significant policy implications in relation to the framework used in Australian jurisdictions that promote, retain, or otherwise maximise, the opportunities for affordable housing.

Full scale fire tests of a new light gauge steel floor-ceiling system

Cold-formed steel members can be assembled in various combinations to provide cost-efficient and safe light gauge floor systems for buildings. Such Light gauge Steel Framing (LSF) systems are widely accepted in industrial and commercial building construction. An example application is in floor-ceiling systems. Light gauge steel floor-ceiling systems must be designed to serve as fire compartment boundaries and provide adequate fire resistance. Fire-rated floor-ceiling assemblies formed with new materials and construction methodologies have been increasingly used in buildings. However, limited research has been undertaken in the past and hence a thorough understanding of their fire resistance behaviour is not available. Recently a new composite floor-ceiling system has been developed to provide higher fire rating under standard fire conditions. But its increased fire rating could not be determined using the currently available design methods. Therefore a research project was carried out to investigate its structural and fire resistance behaviour under standard fire conditions. In this research project full scale experimental tests of the new LSF floor system based on a composite ceiling unit were undertaken using a gas furnace at the Queensland University of Technology. Both the conventional and the new steel floor-ceiling systems were tested under structural and fire loads. Full scale fire tests provided a good understanding of the fire behaviour of the LSF floor-ceiling systems and confirmed the superior performance of the new composite system. This paper presents the details of this research into the structural and fire behaviour of light gauge steel floor systems protected by the new composite panel, and the results.

Can book-to-market and size be risk factors that predict economic growth in Asia's emerging economies?

We investigate whether the two 2 zero cost portfolios, SMB and HML, have the ability to predict economic growth for markets investigated in this paper. Our findings show that there are only a limited number of cases when the coefficients are positive and significance is achieved in an even more limited number of cases. Our results are in stark contrast to Liew and Vassalou (2000) who find coefficients to be generally positive and of a similar magnitude. We go a step further and also employ the methodology of Lakonishok, Shleifer and Vishny (1994) and once again fail to support the risk-based hypothesis of Liew and Vassalou (2000). In sum, we argue that search for a robust economic explanation for firm size and book-to-market equity effects needs sustained effort as these two zero cost portfolios do not represent economically relevant risk.

Evolutionary algorithms for sustainable building design

This approach to sustainable design explores the possibility of creating an architectural design process which can iteratively produce optimised and sustainable design solutions. Driven by an evolution process based on genetic algorithms, the system allows the designer to “design the building design generator” rather than to “designs the building”. The design concept is abstracted into a digital design schema, which allows transfer of the human creative vision into the rational language of a computer. The schema is then elaborated into the use of genetic algorithms to evolve innovative, performative and sustainable design solutions. The prioritisation of the project’s constraints and the subsequent design solutions synthesised during design generation are expected to resolve most of the major conflicts in the evaluation and optimisation phases. Mosques are used as the example building typology to ground the research activity. The spatial organisations of various mosque typologies are graphically represented by adjacency constraints between spaces. Each configuration is represented by a planar graph which is then translated into a non-orthogonal dual graph and fed into the genetic algorithm system with fixed constraints and expected performance criteria set to govern evolution. The resultant Hierarchical Evolutionary Algorithmic Design System is developed by linking the evaluation process with environmental assessment tools to rank the candidate designs. The proposed system generates the concept, the seed, and the schema, and has environmental performance as one of the main criteria in driving optimisation.

Towards compatible and integrated airport and regional land use planning in Australia

Over the past decade privatised capital city airports in Australia have planned developed a range of non aviation commercial and retail land uses on airport land. Many surrounding municipalities consider this development in conflict with existing regional land use planning. Conversely airport operators are alarmed at continued urban consolidation and encroachment of incompatible regional development. Land use planning within and surrounding Australian capital city airports does not support compatible and integrated land use. It is currently a fragmented process due to: 1) current legislative and policy frameworks; 2) competing stakeholder priorities and interests; and 3) inadequate coordination and disjointed decision-making. This paper will examine privatised Australian airport development and consider three case studies to detail the context of airport and regional land use planning. A series of stakeholder workshops have served to inform the procedural dynamics and relationships between airport and regional decision-making. This exploratory research will assist in informing the knowledge gaps between aviation, airport development and broader urban land use policy. This paper will provide recommendations to enhance approaches to land use planning for airports and adjacent metropolitan regions in Australia and overseas.

Developing a life-cycle costing analysis model for sustainability enhancement in road infrastructure project

With increasing pressure to provide environmentally responsible infrastructure products and services, stakeholders are putting significant foci on the early identification of financial viability and outcome of infrastructure projects. Traditionally, there has been an imbalance between sustainable measures and project budget. On one hand, the industry tends to employ the first-cost mentality and approach to developing infrastructure projects. On the other, environmental experts and technology innovators often push for the ultimately green products and systems without much of a concern for cost. This situation is being quickly changed as the industry is under pressure to continue to return profit, while better adapting to current and emerging global issues of sustainability. For the infrastructure sector to contribute to sustainable development, it will need to increase value and efficiency. Thus, there is a great need for tools that will enable decision makers evaluate competing initiatives and identify the most sustainable approaches to procuring infrastructure projects. In order to ensure that these objectives are achieved, the concept of life-cycle costing analysis (LCCA) will play significant roles in the economics of an infrastructure project. Recently, a few research initiatives have applied the LCCA models for road infrastructure that focused on the traditional economics of a project. There is little coverage of life-cycle costing as a method to evaluate the criteria and assess the economic implications of pursuing sustainability in road infrastructure projects. To rectify this problem, this paper reviews the theoretical basis of previous LCCA models before discussing their inability to determinate the sustainability indicators in road infrastructure project. It then introduces an on-going research aimed at developing a new model to integrate the various new cost elements based on the sustainability indicators with the traditional and proven LCCA approach. It is expected that the research will generate a working model for sustainability based life-cycle cost analysis.

Developing a conceptual model for measuring the satisfaction levels of Malaysian contractors

The evaluation of satisfaction levels related to performance is an important aspect in increasing market share, improving profitability and enlarging opportunities for repeat business and can lead to the determination of areas to be improved, improving harmonious working relationships and conflict avoidance. In the construction industry, this can also result in improved project quality, enhanced reputation and increased competitiveness. Many conceptual models have been developed to measure satisfaction levels - typically to gauge client satisfaction, customer satisfaction and home buyer satisfaction - but limited empirical research has been carried out, especially in investigating the satisfaction of construction contractors. In addressing this, this paper provides a unique conceptual model or framework for contractor satisfaction based on attributes identified by interviews with practitioners in Malaysia. In addition to progressing research in this topic and being of potential benefit to Malaysian contractors, it is anticipated that the framework will also be useful for other parties - clients, designers, subcontractors and suppliers - in enhancing the quality of products and/or services generally.

A new approach to assessing Malaysian contractor satisfaction levels

The extent of poor project outcomes is a recurring issue for construction industries worldwide. One of the main causes of these and project failure seems to be the inability of contractors to provide a high level of service quality to the project team. In Malaysia, design failures have also been identified as a further contributory factor. To overcome this, different types of subjective performance measurement have been progressively developed. These approaches are typically concerned with client satisfaction, customer satisfaction, home buyer satisfaction and occupant satisfaction, but very seldom consider contractor satisfaction. This paper examines the implications of this, and what is involved in developing satisfaction measures based on contractor perception instead of the typical sole concern with client performance. As a result, other attributes such as participants’ performance, business performance, project performance, external factors and contractor characteristics are also examined. Several potential attributes are derived from interviews among Malaysian contractors, namely: performance (direct attributes) and contractor characteristics (indirect attributes) that possibly influence contractor satisfaction levels. These attributes are then developed to improve the existing conceptual framework. The developed framework is expected to help the project team in performing projects more efficiently, maintaining service quality and improving relationships between participants. In addition, the findings of the paper should assist contractors enhance competitiveness, improve their image and create more job opportunities in the future.

Housing supply in Australia : the impact of the availability of development finance

Before the Global Financial Crisis many providers of finance had growth mandates and actively pursued development finance deals as a way of gaining higher returns on funds with regular capital turnover and re-investment possible. This was able to be achieved through high gearing and low presales in a strong market. As asset prices fell, loan covenants breached and memories of the 1990’s returned, banks rapidly adjusted their risk appetite via retraction of gearing and expansion of presale requirements. Early signs of loosening in bank credit policy are emerging, however parties seeking development finance are faced with a severely reduced number of institutions from which to source funding. The few institutions that are lending are filtering out only the best credit risks by way of constrictive credit conditions including: low loan to value ratios, the corresponding requirement to contribute high levels of equity, lack of support in non-prime locations and the requirement for only borrowers with well established track records. In this risk averse and capital constrained environment, the ability of developers to proceed with real estate developments is still being constrained by their inability to obtain project finance. This paper will examine the pre and post GFC development finance environment. It will identify the key lending criteria relevant to real estate development finance and will detail the related changes to credit policies over this period. The associated impact to real estate development projects will be presented, highlighting the significant constraint to supply that the inability to obtain finance poses.

Property development cycle and acquisition strategies

This presenation is part of the UDIA (Qld) Property Development Essentials program, which is a two-day introductory course designed for new entrants to the property industry. The course provides practical advice and direction for those looking to take the first steps into the development industry. This presentation identifies economic factors and their influence on land acquisitions, as well as providing an understanding the property development and business cycles and their impacts on acquisition strategies (long v. short term projects)

Assessing the impact of floods and flood legislation on residential property prices

The changing development and population sprawl in major cities, especially those located in high rainfall areas, has resulted in the need to review and re-assess potential flood impacts in these cities. In many cases these new flood lines and flood maps have placed residential property that was previously considered to be flood free to now be considered to be potentially flood liable. Previous research based in Sydney and the UK has identified the fact that residential property that has been subject to flooding has a decreased price and higher investment risk than flood free property in the same location. These studies have also shown that the greatest impact on residential property subject to flooding is just following a flood event. In June 2009, Brisbane City Council released revised flood maps for the Greater Brisbane region and these maps have identified areas that have not previously been considered flood liable. This paper will analyse the sale performance of flood liable streets in the main flood areas of Brisbane over the period January 1990 through to June 2009, to determine the variation in price for these flood liable areas to the residential property immediately adjoining them. The average sale price will be tracked on both a geographic location and socio-economic basis.

Effect of section geometry on the lateral distortional buckling of LiteSteel beams

The LiteSteel Beam (LSB) is a new hollow flange section developed by OneSteel Australian Tube Mills using their patented dual electric resistance welding and automated continuous roll-forming technologies. It has a unique geometry consisting of torsionally rigid rectangular hollow flanges and a relatively slender web. It has found increasing popularity in residential, industrial and commercial buildings as flexural members. The LSB is considerably lighter than traditional hot-rolled steel beams and provides both structural and construction efficiencies. However, the LSB flexural members are subjected to a relatively new lateral distortional buckling mode, which reduces their member moment capacities. Unlike the commonly observed lateral torsional buckling of steel beams, the lateral distortional buckling of LSBs is characterised by simultaneous lateral defection, twist and cross sectional change due to web distortion. The current design rules in AS/NZS 4600 (SA, 2005) for flexural members subject to lateral distortional buckling were found to be conservative by about 8% in the inelastic buckling region. Therefore, a new design rule was developed for LSBs subject to lateral distortional buckling based on finite element analyses of LSBs. The effect of section geometry was then considered and several geometrical parameters were used to develop an advanced set of design rules. This paper presents the details of the finite element analyses and the design curve development for hollow flange sections subject to lateral distortional buckling.

Lateral distortional buckling design rules for back to back LiteSteel beams

A new cold-formed steel beam, known as the LiteSteel Beam (LSB), has the potential to transform the low-rise building industry. The new beam is effectively a channel section with two rectangular hollow flanges and a slender web, and is manufactured using a simultaneous cold-forming and electric resistance welding process. Research into the flexural behaviour of single LSB members showed that the LSBs are susceptible to lateral distortional buckling effects and their moment capacities are significantly reduced for intermediate spans. Build-up LSB sections are expected to improve their flexural capacity and to enhance their applications. They are also likely to mitigate the detrimental effects of lateral distortional buckling observed with single LSB members of intermediate spans. However, the behaviour of build up beams is not well understood. Currently available design rules were found to be inadequate to predict the member moment capacities of back to back LSBs. Therefore a research project based on both experimental and numerical studies was undertaken to investigate the flexural behaviour of back to back LSBs with various longitudinal connection spacings under a uniform moment. New design rules were developed using the moment capacity data obtained using finite element analyses and experimental tests. This paper presents the details of the development of design rules for the back to back LSB sections.

Contesting ‘sustainability’ in infrastructure planning : The debate of the public interest in Brisbane’s Boggo Road Busway development

Sustainable infrastructure demands that declared principles of sustainability are enacted in the processes of its implementation. However, a problem arises if the concept of sustainability is not thoroughly scrutinised in the planning process. The public interest could be undermined when the rhetoric of sustainability is used to substantiate a proposed plan. This chapter analyses the manifestation of sustainable development in the Boggo Road Busway Plan in Brisbane, Australia against the sustainability agenda set in the South East Queensland Regional and Transport Plans. Although the construction of the Busway was intended to improve public transport access in the region, its implementation drew significant environmental concerns. Local community groups contested the ‘sustainability’ concept deployed in Queensland’s infrastructure planning. Their challenges resulted in important concessions in the delivery of the Busway plan. This case demonstrates that principles of sustainable infrastructure should be measurable and that local communities be better informed in order to fulfil the public interest in regional planning.