March

Real Estate
Development
Economics

Development economics is an applied course in market analysis of

housing and real estate markets from an international perspective,
with special emphasis on the Ethiopian experience. The aim of the
course is to give you knowledge of theories behind the methods
of market analysis used by real estate firms. The course will also
help you to develop skills in methods for markets analysis.

Negash Zerga lenegash@yahoo.com

Aim
This course in market analysis and development will prepare you for work in the real estate field, within
consultancy firms, institutional investors and building companies.

Objectives
The course should enable you to develop skills in methods for market analysis and development of housing
by
• Identifying the criteria for determining the appropriate level of a market analysis.
• Being able to determine if a site meets physical, regulatory and environmental requirements –
the productivity analysis of the project.
• Examining the various theories or models of urban growth and how they relate to real estate
market analysis.
• Recognizing macro determinants in equilibrium, cyclical patterns in the real estate market and
the relationship between the national business cycle and the local real estate cycle.
• Being able to delineate a market area, as well as to identify and collect the market data needed
to evaluate supply, demand and then quantify the gap.
• Analyzing the financial feasibility of the development measuring cash flows, costs, loans, profits,
etc.

Contents in brief
Macro determinates in equilibrium, market area, productivity analysis, real estate demand, competitive
supply, site location, the developer and his role within the home building industry, development profit, and
project work.

Assessment
Assessment will consist of both a written exam and an evaluation of a project. The overall goal of assessing
this course is to determine the extent to which the course aim has been fulfilled as specified in the objectives.

Credits
Credits: 4 ECTS [European Credit Transfer System]

Grading
Grading: A‐F. The exam contains 10 questions and each of these questions is given a grade between zero to
ten points. A maximum score from the written exam is therefore 100 points. The limit to pass the written
exam is 50 points. The projects must be approved for you to pass the coursework.

Scale of grades
E: 50 points on written exam (minimum requirement is 50 points to pass the written exam)
D: 51‐60 points; C: 61‐75 points; B: 76‐85 points; A: 86‐100 points

Resources for students

Textbook will be Market Analysis for Real Estate, Fanning, Appraisal Institute. Chapters 1 5, (read chapter 1‐2
slightly), chapter 7‐9 and chapter 11‐12.
How come that small developers are more efficient than large developers? K Psilander. Niching in Residential
Development, K Psilander.

Feedback for course improvement

Negash Zerga lenegash@yahoo.com
At the end of the course, you will be asked to complete an evaluation form. This provides us with valuable
feedback that we use to continuously upgrade our courses. We therefore strongly urge you to complete this
evaluation form at the end of the course.

Real Estate Development Economics Course Outline

Part One: Development Economics
1. Introduction to REDMA
2. Small scale developer
2.1. Kind of developments
2.2. Business idea
2.3. Organization
2.4. Characteristics of the developer
3. Five phases of property development process
3.1. Inception of an idea
3.2. Refinement and design
3.3. Feasibility Analysis
3.4. Negotiations and concludes
3.5. Production to start
4. Development team by each phase
5. Selection of amenities
5.1. Housing as a shelter
5.2. Housing as a package of life quality
5.3. Development Types
5.3.1.1. Average development
5.3.1.2. Niched development
6. Defining the market area
6.1. Urban growth and land use
6.2. Market area as a geographical area
6.3. Methods to set the boundaries
7. Productivity analysis
7.1. Uniqueness of every piece of land
7.2. types of attributes
7.3. Amenity Index
8. Macro economy and Real Estate market
8.1. Real estate market
8.2. Business cycle and real estate market
8.3. Property and the capital (asset) market model
8.4. Prime movers on
9. Methods to estimate real estate demand
10. Methods to estimate competitive supply
10.1. Existing stock
10.2. New supply offered to the market
10.3. Coming supply

Negash Zerga lenegash@yahoo.com

11. Calculating Development Profit

Part Two: Valuation

1. Introduction to valuation
2. Value Theory – Economic Value
3. The Appraisal Process
4. Use of an Appraisal
5. Purpose of Value
6. Approaches to Valuation
7. Valuation Methods
8. Lease Contracts
9. Comparable Sales Methods
10. Income Approach
11. Valuation reporting

Project work: Real Estate Development

Definition of potential target groups and a storyline
Preliminary design of buildings and structures in your project.
Plan for amenities that you can bring into your project.
Plan for amenities that exist within your market area.
What are the preliminary costs for your project?
What might the competing projects be to your project?

Structure and content of the report

1. (Lideta, Piassa, Arat Killo, Sidist Killo, Megenagna, Merkato)
1.1. Vision and the idea of the project
1.2. Choice of target groups
1.3. Design of buildings and structures
1.4. Amenities
1.5. Landscaping
2. Economic development
2.1. International economic outlook
2.2. National and regional economic outlook
3. Market analysis
3.1. Productivity analysis
3.2. Market area
3.3. Demand
3.4. Supply
3.5. Amenity index
3.6. Gap and absorption
4. Development calculation
4.1. Calculation of costs
4.2. Development profit
5. Conclusions of feasibility
Negash Zerga lenegash@yahoo.com