1. RISKS ASSOCIATED WITH PROPERTY DEVELOPMENT
Submitted in Partial Fulfilment of the Requirements
for the degree of
BACCALAREUS OF SCIENTIAE IN CONSTRUCTION MANAGEMENT
In the faculty of the Engineering, the Built Environment and
Information Technology at the
Nelson Mandela Metropolitan University
By
Ryan Fourie
December 2012
Supervisor
B. Botha

2. ii
DECLARATION STATEMENT
I, ________________________, the undersigned, hereby declare that this work is in all respects
my own. No part thereof has been copied from another source without proper reference thereto.
I am well aware and accept the consequences if this declaration is in fact found to be false.
Signed this ___ day of _______ 2012 at ______________________________
___________________
(Signature)

3. iii
ACKNOWLEDGEMENTS
I want to extend my greatest thanks and gratitude to those who have given uncompromising
support and advice throughout this final year of my studies, especially with respect to this
research study. Sincere appreciations are extended to:
 Jesus Christ for always being the solid foundation on which I can build my life and
carries me through no matter how troublesome the circumstances;
 My family Wollie, Annette and Jody-Ann for all the love and support that have helped
me in my studies;
 Uncle Leon Myburgh, for being my role model and inspiration, helping me realise my
potential and for all the support and motivation to be the best I can be;
 My supervisor and mentor, Mr Brink Botha, for all the advice, motivation and guidance
throughout my studies, and
 Nelson Mandela Metropolitan University for giving me the opportunity to develop
myself into the accomplished individual I am today and providing me with the tools to
achieve great heights in life.

4. iv
ABSTRACT
The research investigates the risks and uncertainties that are encountered within property
development. The risks and uncertainties are present in all developments, although the type and
extent differs according to the form of and the sector within which the development takes place.
There are numerous factors which could result in failure of a project. These are not limited to
inadequate feasibility studies, changing market and economic conditions, and an unacceptable
model for perceived success used on the development. It is imperative that risks and
uncertainties are not avoided but rather identified and analysed to enable an informed decision to
be made at the start of the development.
The structured questionnaire that was based for the quantitative survey led to the compilation of
key findings:
 Shortcomings are encountered when comparing development projections to actual results;
 There is a need to reduce the extent to which client needs and demands deter the project
outcome;
 Comprehensive feasibility analysis are required regarding the projection of economic and
market conditions;
 Too often unforeseen circumstances are not identified within an acceptable model for
perceived success, and
 Increasing influence of legislative and environmental factors requires more attention and
detailed analysis during feasibility and planning stages.
Although risks are inherent in property development, it is essential that instead of being
uninformed about these risks, all available resources should be used to identify and reduce the
extent of their influence should they arise.
Keywords: Construction, Property Development, Risk, South Africa

5. v
TABLE OF CONTENTS
DECLARATION STATEMENT........................................................................................... ii
ACKNOWLEDGEMENTS................................................................................................... iii
ABSTRACT.............................................................................................................................iv
LIST OF TABLES ................................................................................................................ vii
LIST OF FIGURES ............................................................................................................. viii
OUTLINE OF THE STUDY................................................................................................ iix
1 CHAPTER ONE: THE BACKGROUND TO THE STUDY .......................................1
1.1 Introduction............................................................................................................................. 1
1.2 Statement of the problem....................................................................................................... 3
1.3 Statement of the sub-problems .............................................................................................. 4
1.4 Hypotheses.............................................................................................................................. 4
1.5 The objectives of the study ..................................................................................................... 4
1.6 Delimitations of the study ....................................................................................................... 5
1.7 The assumptions...................................................................................................................... 5
1.8 The importance of the study ................................................................................................... 5
2 CHAPTER TWO: REVIEW OF THE RELATED LITERATURE ...........................6
2.1 Introduction............................................................................................................................. 6
2.2 Nature of property development............................................................................................ 6
2.3 Structure of property development relationships .................................................................. 7
2.4 Background to property development and the process ......................................................... 8
2.5 Property development life cycles associated with risk ......................................................... 10
2.6 Feasibility studies .................................................................................................................. 11
2.6.1 Financial feasibility study............................................................................................... 13
2.7 Risk, uncertainty and risk management................................................................................ 14
2.7.1 Cognitive risk in real estate ........................................................................................... 14
2.7.2 Risks and uncertainty in property valuations................................................................ 15
2.7.3 Risk management .......................................................................................................... 18
2.8 Project management............................................................................................................. 23
2.9 PESTEL Analysis...................................................................................................................... 27

6. vi
3 CHAPTER THREE: RESEARCH METHODOLOGY .............................................28
3.1 Introduction........................................................................................................................... 28
3.2 The Data................................................................................................................................. 28
3.2.1 Primary data .................................................................................................................. 28
3.2.2 Secondary data.............................................................................................................. 28
3.3 Method.................................................................................................................................. 29
3.4 Sample stratum ..................................................................................................................... 29
3.5 Questionnaire design............................................................................................................. 29
3.6 Questionnaire administration ............................................................................................... 30
3.7 Ethical considerations............................................................................................................ 31
4 CHAPTER FOUR: RESULTS AND FINDINGS........................................................32
4.1 Introduction........................................................................................................................... 32
4.2 Survey results and findings.................................................................................................... 33
4.2.1 Section 1: Demographic information of respondents................................................... 33
4.2.2 Section 2: Evidence from questionnaires...................................................................... 38
4.3 Hypotheses Testing ............................................................................................................... 47
Hypothesis one.............................................................................................................................. 47
Hypothesis two.............................................................................................................................. 48
Hypothesis three ........................................................................................................................... 49
5 CHAPTER FIVE: SUMMARY, CONCLUSIONS AND
RECOMMENTDATIONS.............................................................................................50
5.1 Summary................................................................................................................................ 50
5.2 Conclusions............................................................................................................................ 51
5.3 Recommendations................................................................................................................. 52
5.3.1 Future study................................................................................................................... 53
References...............................................................................................................................54
APPENDIXES........................................................................................................................59
Appendix A: Cover letter ......................................................................................................60
Appendix B: Thank you letter ..............................................................................................61
Appendix C: Structured Questionnaire...............................................................................62

7. vii
LIST OF TABLES
Table 2.1 Summarizing the distinctions between skill based, rule based
and knowledge based errors. 15
Table 2.2 Five stages of development and the trade-offs. 22
Table 3.1 Response rates. 29
Table 3.2 Questionnaire layout according to sub-problems and hypotheses. 30
Table 4.1 Ranges and categories of „mean scores‟. 33
Table 4.2 Professional capacity of the respondent. 34
Table 4.3 Number of years with the organization. 34
Table 4.4 Number of years in the construction industry. 35
Table 4.5 Number of years as a property developer, property development
manager or construction project manager. 35
Table 4.6 Level of education of respondent. 36
Table 4.7 Annual business volume generated by the organization. 36
Table 4.8 Gender of respondent. 37
Table 4.9 Age of respondent. 37
Table 4.10 Extent of involvement in various forms of development. 38
Table 4.11 Extent of involvement in the different sectors. 39
Table 4.12 Actual project results compared to projections. 40
Table 4.13 Contributors to realizing project projections. 41
Table 4.14 Project duration comparisons. 41

8. viii
Table 4.15 Parameters influencing project duration. 42
Table 4.16 Regularity of unforeseen circumstances. 43
Table 4.17 Parameters with potential shortcomings realized. 44
Table 4.18 Projections and actual results differ. 45
Table 4.19 Actual results deviating from estimates. 46
LIST OF FIGURES
Figure 2.1 Project Life-Cycle (of feasibility studies). 12
Figure 2.2 The management of risk. 19
Figure 2.3 Typical pattern of market risk and value during the development period. 20
Figure 2.4 The free market system. 22

9. ix
OUTLINE OF THE STUDY
Chapter 1: The Background of the Study
This chapter starts off with an introduction to the study relevant to the topic; this is then
followed by the main problem statement after which the sub-problems were described. The
hypotheses were followed by the delimitations of the study, assumptions and the importance of
the study.
Chapter 2: Review of the Related Literature
This chapter started with the overview of risks in property development and who are the bearers
of these risks. This was followed by the in-depth review of the literature in terms the nature of
property development, structure of property development relationships, background to property
development and the process, property development life cycles associated with risk, feasibility
studies, risk, uncertainty and risk management, project management and PESTEL Analysis.
Chapter 3: Research Methodology
This chapter defined the process followed in obtaining the relevant data along with the various
types of data collected.
The chapter then defined the method of analysis used, identified the sample stratum and what
was expected of the respondents. The data were evaluated and interpreted in a statistical manner
with the questionnaires working on a rating system and also includes the layout followed in the
compilation of the questionnaire. Each sub-problem was analysed individually with the testing
of the respective hypotheses.
Chapter 4: Results and Hypotheses Evaluation
This chapter reveal the findings, which were obtained during the statistical analysis; this shows
the extent to which the research hypotheses are correct or incorrect. The primary data along with
the review of related literature were used to test the hypotheses, which relate to each of the sub-
problems.

10. x
Chapter 5: Summary, Conclusions and Recommendations
This chapter will include a summary of the study problem, the literature review and
findings/results of the study as well as conclusions and recommendations; these will be based on
the overall findings and relationship between the literature and the data findings.
A Definitions of the terms
Appraisal
An opinion of value supported by market research (Collier et al., 2008: 165).
Boom
A period of time during which overall business activity is rising at a more rapid rate than
its long-term trend (Myers, 2004: 251).
Builder
The builder will be the general contractor appointed for the actual construction of the
proposed project, the builder will take on the responsibility of providing assurances which
will come into effect and provide funds for the completion of construction when the
builder fails to do so according to the predetermined requirements and standards (Collier et
al., 2008: 69).
Building cycles
Refers to the fluctuations in construction output – from boom to bust and back again
(Myers, 2004: 252).
Capital growth (net worth)
Is the amount that land and buildings increase in value over time. Usually there is a trade-
off between high capital growth and high rental income returns, though this depends on the
sector and the quality of asset (Thomas, 2010: chapter 1).

11. xi
Design and Build
An all-embracing agreement in which a contractor agrees to undertake building,
engineering work, design and cost estimating as part of a package for a client (Myers,
2004: 252).
Developer
The developer can be an individual, firm or entity which will identify and acquire land that
meets the criteria for the proposed development, the developer will need to attain the
required approval for the development specific to the identified land as well as invest the
initial seed capital in order to get the development of the ground (Collier et al., 2008: 69).
Development
It‟s the carrying out of building, engineering, mining or other operations in, on, over or
under land, or the making of any material change in the use of any buildings or other land
(Millington, 2009: 1).
Feasible
Means practical, possible, capable of being accomplished (Cloete, 2006: 4).
Inflation
A sustained rise in prices, formally measured by the retail price index (Myers, 2004: 258).
Investment
Spending by businesses on things like machines and buildings which can be used to
produce goods and services in the future (Myers, 2004: 258).
Investor (owner)
This can be an individual, firm or equity that is responsible for providing the capital
needed for completion of the proposed project, they are however cautious and usually only
provide these funds once development rights have been secured as the investor often takes
full liability for the provision of such capital (Collier et al., 2008: 69).

12. xii
Lender
This can be an individual, firm or equity which provides the capital needed to the investor,
the lender will only commit to the provision of the required funds once development rights
are secured (Collier et al., 2008: 69).
Market area
“Geographic area in which property lies” (Collier et al. 2008: 91).
Market value
Price that a willing buyer or seller would reach in an arm‟s-length transaction in a
competitive, open market (Collier et al., 2008: 165).
Mortgage
Document by which a borrower conveys an interest in real property to a lender as security
for payment of debt (Collier et al., 2008: 238).
Procurement
A generic term used by professionals within the built environment to describe the general
process of obtaining, acquiring and securing some property or land (Myers, 2004: 264).
Project manager
Individual or firm who handles property management once project is completed (Collier et
al., 2008: 91).
Public sector
The simplest definition is all forms of ownership by central and local government (Myers,
2004: 265).
Pure risk
It exists when there is a chance of a loss but no chance of a gain (Cloete, 2001: 3).

13. xiii
Real property
Items that are attached to a building and cannot be removed without causing damage to the
building (Collier et al., 2008: 216).
Rental Income (cash flow)
Is the money you receive from letting a tenant enjoy your property over a period of time.
High-income-producing properties are often termed „cash flow positive‟ as they produce
more cash than the total expenses required to hold the property (Thomas, 2010: chapter 4).
Risk
It is the variation in losses that can occur over a specified period (Cloete, 2001: 3).
Speculative risk
It exists when there is a chance of a gain as well as a chance of a loss (Cloete, 2001: 3).
Tax benefits
Are the value you or your company receives as a result of holding real estate. This includes
all deductions for real estate-related costs, including interest, bank and agent fees, building
and equipment depreciation, and all maintenance costs (Thomas, 2010: chapter 1).
Uncertainty
It is the perception of a person of a risk in a given situation (Cloete, 2001: 3).
B Abbreviations
PD: Property development
PDP: Property development process
PESTEL: Stands for Political, Economic, Social, Technical, Environment and Legislative
PRS: Property risk scoring
ROV: Real Option Valuation

14. 1
1 CHAPTER ONE: THE BACKGROUND TO THE STUDY
1.1 Introduction
“Property development can be described in its widest sense as any activity which changes
the state of land” (Millington, 2009: 1). These changes can be in any of the following three
forms:
 Erecting of completely new buildings;
 Demolishing of old buildings and the construction of new ones, and
 Improving existing buildings in a number of ways namely; improving the building
through repairs, adding fixtures and fittings, changing and improving the design or
enlarging the existing building.
According to Guy and Henneberry (2002: 78-79), the private sector in property
development often deal with projects of a speculative nature, which results in taking
substantial risks, not only may actual costs exceed the initial estimated costs, but these can
be ever changing throughout the lifetime of the development. However, the risk of
development relates not only to the uncertainty attached to estimating the values of all the
numerous variables, but also to the inherently sensitive nature of the appraisal calculation,
where the residual answer can vary dramatically with only small changes in some of the key
variables (Guy & Henneberry, 2002: 78-79).
Over time it has become clear that it‟s generally in the public sector where things go wrong
and risks are realised. Flyvberg (2003 cited by Cartlidge, 2004: 47) concluded that the
public sector ends up in the spotlight not because of poor risk management, but rather
because of time and cost overruns, which are a result of promoters „cooking the figures‟ to
make the project look more appealing and beneficial to the society.

15. 2
The Mott MacDonald (2002 cited by Cartlidge, 2004: 48) report highlighted that in large
scale public projects, failure to meet expectations is due to a lack of skill and awareness on
behalf of those planning the development which results in optimism when appraising the
project. The report went on and identified the major risk areas that lead to cost and time
overruns due to insufficient risk mitigation strategies. These include:
 Inadequacy of the business case – 58%;
 Environment impact – 19%;
 Disputes and claims – 16%;
 Economics (macro-economic business cycle) – 13%, and
 Late contractors‟ involvement in design – 12%.
According to Nel (1992 cited by Guy & Henneberry, 2002: 73), people have the deep desire
to own property which then contributes and forms the foundation of creating wealth within a
society. “Real property has created more wealth than gold, diamonds or any other
investment” (Nel, 1992: 24). In most cases, investors approach property because of the
opportunity which it presents as high risks can award investors with high returns; this results
in the possible attainment of high profit margins (Guy & Henneberry, 2002: 73).
“Property is one of few investment opportunities that do not require money to make money”
(Lee, 2008: 9). In property, the investor has the benefit of having more control over the
investment than in any other investment opportunity; the investor can exercise a form of
control over the process as well as the outcome (Lee, 2008: 9).
“Property development is a business that works on margins between cost and sale price”,
when these margins are absent the proposed project will not be profitable and the incentive
to engage the project will be lost (Ashworth, 2008: 19).
“Development is a complex process requiring organization and knowledge of many aspects
of the real estate development industry” (Collier, Collier & Halperin, 2008: 89). A
developer must determine what type of development to undertake and which market area
will be targeted, after these two initial steps, research will be done on the vacancy, rental-
growth rates and comparing the proposed development to similar existing ones to evaluate
the opportunity available (Collier et al., 2008: 89-90).

16. 3
Quite a variety of developers exists within the property market with each having slightly
different objectives, views and approaches to risk assessment (Guy & Henneberry, 2002:
73). Developers vary enormously in the degree of expertise they bring to the development
team (Ratcliffe, Stubbs & Shepherd, 2004: 267). The extent to which the developer is
involved in the development process also differs as their backgrounds can vary immensely
from building, estate agency, engineering, finance, law and architecture to a business
manager (Ratcliffe et al., 2004: 267).
1.2 Statement of the problem
Property development is one of the most rewarding investment opportunities available to
investors. These rewards and high profit margins however come hand in hand with taking
some sort of risk and accepting a degree of uncertainty; the extent of these are largely
dependent on how far into the future predictions are made. Poor management of risks and
uncertainties lead to developments not realizing the expectations, which were set initially
and thereby causes the development to fail in a number of ways. Certain processes and
management strategies exist which can minimise exposure to these risks and uncertainties
and therefore moves one step closer to ensuring development success.

17. 4
1.3 Statement of the sub-problems
1.3.1 Sub-problem one: Project actual results are often not in synergy with feasibility
projections.
1.3.2 Sub-problem two: Actual project duration exceeds estimated project duration.
1.3.3 Sub-problem three: Unforeseen circumstances are not identified within an
acceptable property development model.
1.4 Hypotheses
1.4.1 Hypothesis one: Inadequate feasibility projections lead to the disparity between
project projections and actual.
1.4.2 Hypothesis two: Changing market/economic conditions leads to time overruns in
projects.
1.4.3 Hypothesis: Inadequate PESTEL analysis leads to the failure to capture unforeseen
circumstances in property development.
1.5 The objectives of the study
1.5.1 Identify the risk factors involved in property development in the private and public
sectors;
1.5.2 Compare market/economic conditions during the planning stage with that
experienced during the project;
1.5.3 Evaluate the relationship between escalation estimates/provisions made during the
planning phase of the project with that realized during the project;
1.5.4 Investigate the project management techniques/processes undertaken prior to
projects to determine whether they are adequate with regards to complex projects,
and
1.5.5 Determine whether PESTEL analyses are conducted thoroughly.

18. 5
1.6 Delimitations of the study
1.6.1 Only property developers in South Africa will be consulted for research and
surveyed via questionnaires during this study, they also need to be actively
participating in some way or another within the Built Environment regarding
property development.
1.6.2 Only construction project managers and relevant professionals with the required
experience who are actively involved in management of construction projects will be
consulted and surveyed via questionnaires.
1.7 The assumptions
 Property development involves risks and uncertainties
 Poor management of risks and uncertainties lead to some sort of development failure
1.8 The importance of the study
Many projects don‟t secure good enough project goal achievement, which then leads to
failure through project delay, cost overruns and poor quality on the project. Risks and
uncertainties are ever present in all stages of development and therefore implementation of
the risk management plays a major role in the realization of these failures (Albahar and
Crandall 1990; ministry of Defence 1991; Wideman 1992; Chapman 1997; Project
Management Institute 2000).
There is a need for an effective risk management process to enhance the performance of a
project and move closer to ensuring the success of the project, the risk management process
usually consists of three distinct phases namely, risk identification, risk analysis and
response planning (Albahar and Crandall 1990; ministry of Defence 1991; Wideman 1992;
Chapman 1997; Project Management Institute 2000).

19. 6
2 CHAPTER TWO: REVIEW OF THE RELATED LITERATURE
2.1 Introduction
The literature is based on the following areas:
 Nature of property development;
 Structure of property development relationships;
 Background to property development and the process;
 Property development life cycles associated with risk;
 Feasibility studies;
 Risk, uncertainty and risk management;
 Project management, and
 PESTEL Analysis.
2.2 Nature of property development
Property is developed to satisfy the expressed needs of society, and property developers
respond in the market-place by supplying the types of property demanded by society
(Millington, 2009: 1). Property development is the process directed at the increase in value
of an existing property (undeveloped or developed) by the application of resources (material
human and capital) (Cloete, 1999: 114). An investment can be seen as giving up something
in the present for a possible future return, property development is therefore seen as an
active form of investment (Cloete, 1999: 114).
While development is concerned with the improvement of conditions of life, economics is
concerned with achieving the most effective use of resources in such production. Therefore
development is fundamentally an economic process since economics has an abiding interest
in development, and all theories of development have significant economic dimensions
(Peet, 1999: 17).

20. 7
Millington (2009: 9) separates those who decide to undertake developments into two groups
of developers:
i. Those who develop to satisfy their own needs, and
ii. Those who develop to satisfy the needs of others.
Public and private sector developments should be seen as two different types of
developments as the nature of the development differs. The public sector is mostly
concerned with creating value for the community rather than focusing on the cost of the
actual development, the benefit should therefore exceed the cost for the development to take
place (Cloete, 1999: 114).
The private sector however focuses mainly on cost and the profit that could be generated;
the objective therefore is to sell the product for more than the cost of producing it (Cloete,
1999: 114).
2.3 Structure of property development relationships
Relationships exist between parties that enable the property development process to be
carried out successfully as each party has certain roles and responsibilities that they have to
fulfil. According to Collier et al. (2008: 69), the framework of the various players in the
property development process consists of the developer, builder, investor (owner), lender
and property manager.
2.3.1 Developer
The developer can be an individual, firm or entity which will identify and acquire land that
meets the criteria for the proposed development, the developer will need to attain the
required approval for the development specific to the identified land as well as invest the
initial seed capital in order to get the development of the ground (Collier et al., 2008: 69).
2.3.2 Builder
The builder will be the general contractor appointed for the actual construction of the
proposed project, the builder will take on the responsibility of providing assurances that
will come into effect and provide funds for the completion of construction when the
builder fails to do so according to the predetermined requirements and standards (Collier et
al., 2008: 69).

21. 8
2.3.3 Investor (owner)
This can be an individual, firm or equity that is responsible for providing the capital
needed for completion of the proposed project, they are however cautious and usually only
provide these funds once development rights have been secured as the investor often takes
full liability for the provision of such capital (Collier et al., 2008:69).
2.3.4 Lender
This can be an individual, firm or equity which provides the capital needed to the investor.
The lender will only commit to the provision of the required funds once development
rights are secured (Collier et al., 2008: 69).
2.3.5 Property Manager
The property manager can be an individual, firm or entity which will be responsible for
property management once the project is completed. This will include the marketing and
management thereof (Collier et al., 2008: 69).
2.4 Background to property development and the process
According to Collier et al. (2008: 67), the property development process should be seen as a
process that starts off with a „vision‟, this vision will then be combined with all the
necessary skills and resources in order to create or achieve the objectives of the initial vision
or idea. Millington (2009: 7) defines the property development process as consisting of a
number of stages with the first and most critical stage of all being the „concept‟ for the
development.
The property development process can also be seen as starting with the identification of the
„need‟ for a specific development (Ashworth, 2008: 1) since it is clear that the first step in
the development process is the most important (Millington, 2009: 7) and it will eventually
be the determining factor in whether the development will actually take place. Ratcliffe et
al. (2004: 253) identified that the property development process consists of five phases,
namely:
 Concept and initial consideration;
 Site appraisal and feasibility study;
 Detailed design and evaluation;
 Contract and construction, and
 Marketing, management and disposal.

22. 9
The developer is the agent who, operating within an imperfect price mechanism, assumes
immense responsibility as he has to ensure that scarce land resources are used optimally.
The developer is also responsible for fulfilling the role of an entrepreneur relative to
identifying and activating development opportunities that are then presented to possible
investors (Guy & Henneberry, 2004: 19), which takes place to satisfy the needs and
demands of society (Millington, 2009: 1).
From a client‟s viewpoint, this first step in the Property Development Process (PDP) will
contribute to determining the business case of the project, this is of vital importance as the
client will be making major commitments based on the findings in this initial stage (Cooke
& Williams, 2004: 77).
According to Millington (2009: 229), there is the need to conduct research relative to the
development processes to establish the financial aspects of the proposed project. A
feasibility study will need to be conducted to determine whether the proposed project will be
feasible or not, this will then indicate the level of financial success to be expected from the
project (Millington, 2009: 243).
All countries across the world experience some sort of economic or business cycle but the
extent to which they affect the specific country varies; economic indicators are always
looked at and evaluated to determine the trend which is eventually based on the confidence
expressed by investors (Ashworth, 2008: 37). Economic assessments have identified the
imbalances which are experienced in the property market, this imbalance is largely due to
the difference between demand and supply; this is however rectified over the long run and
the market stabilizes once again (Harvey, 1996; Keogh, 1994).
There are many indicators which can reveal the trend that are affecting the property market
within a country. Such trends include unemployment statistics, bank lending and interest
rates (Ashworth, 2008: 37). According to Henneberry and Rowley (2000: 97), the „boom
and slump‟ which was evident in the last major property cycle „excluded the public sector‟
with the trend occurring to a large extent only in the „private sector‟.

23. 10
Real estate in South Africa has shown growth which created investment opportunities that
are attractive not only to the local investor but also internationally with the „commercial
property‟ showing the „highest returns‟ from 2002 to 2007 (Ramabodu, Kotze and Verster,
2007: 5).
2.5 Property development life cycles associated with risk
When looking at property development life cycles and assessing the market, critical
consideration should be given to site selection that is only possible through thorough
understanding of the property cycle; this then gives guidance regarding the timing for
„buying‟, „selling‟ and „developing‟ property. All markets are driven by „demand‟ and
„supply‟, which is determined to a great extent by the „fear and greed‟ of individuals.
“People instinctively buy in a boom and sell in gloom, which is the exact opposite of what
they should do”; “successful real estate investment and development is about timing, buying
when the market is low and selling when the market is high” (Thomas, 2010: chapter 4).
Lee (2008: 65) argues that from a macro-perspective in pursuit of identifying the next boom
in property one should always be keeping a close eye on the economic cycles both
internationally and locally because the property market is cyclical; it goes up and down with
changes in economic demand and supply.
The timing of economic cycles is the key and when this is achieved, it can result in
remarkable opportunities but the contrary can be catastrophic; this will be as a result of
getting the timing of the economic cycle wrong. “There is an expression, buy when
everyone is selling and sells when everyone is buying” (Lee, 2008: 66).
According to Thomas (2010: chapter 4) the property cycle consists of four stages which
include:
 Stage 1: In stage one, the demand for property increases and this results in property
prices rising and a need for new developments to satisfy the demand is created.
 Stage 2: This stage brings a further rise in demand and therefore boost prices even
further and additional increase in supply of properties. By the time stage two ends, the
property market is really hot and overvalued.

24. 11
 Stage 3: This stage starts with some sort of shock such as; rising interest rates,
tightening of monetary policies and/or unfavourable economic projections.
 Stage 4: At the end of this stage, the cycle has completed a full circle and is back to the
start of stage 1.
2.6 Feasibility studies
According to Cloete (2006: 4), a feasibility study should be done before undertaking any
type of development as it will give a good indication as to the chances of the development
being successful. “A feasibility study involves the comparison of the cost benefit
relationships of alternatives over specific time periods” (Cloete, 2006: 4).
Millington (2009: 229) states that research needs to be conducted with respect to all aspects
of a development before a financial commitment can be made, the research should look into
all factors that are likely to or might affect the profitability of the development. “The depth
of any feasibility study will depend to a large extent on the size of the proposed project and
the amount of money likely to be involved in the development” (Millington, 2009: 229).
According to Burke (2003: 43), a feasibility study is similar to the project charter as it
should be formalised with requirements, boundaries and expected outcomes as follows:
 Who is responsible;
 Project brief to be analysed;
 Who should be involved;
 Level of detail;
 Budget for the feasibility study, and
 Report back date.
The ultimate objective of the feasibility study is to evaluate the available information that is
applicable and to compare this with the development objectives (Cloete, 1999: 127). Cloete
(1999: 127) argues that feasibility studies should follow a general framework in terms of:
1. The objectives of the developer;
2. Economic feasibility;

25. 12
3. Marketing feasibility;
4. Physical feasibility, and
5. Financial feasibility.
Burke (2003: 44) compares a feasibility study to a mini project, which should be managed through
planning and controlling techniques as the study will have its own project life-cycle (see Figure
1).
Figure 2.1: Project Life Cycle (of feasibility studies) Source: Burke (2003: 44)

26. 13
2.6.1 Financial feasibility study
A financial feasibility study will indicate whether financial success is likely in the
proposed project, this study will “reveal that a project is likely to be profitable or that the
likely profit is too small to justify undertaking the project and accepting the inherent risks
that it presents (Millington, 2009: 244).
According to Cloete (2006: 27), the financial feasibility study contains five phases,
namely:
1. Total project „cost and capital estimation‟;
2. Total project‟ income estimation‟;
3. „Cash-flow projections‟ for the duration of the development and the investment;
4. Project „profitability estimation‟ along with a comparison with the investors objectives,
and
5. Project specific „sensitivity analysis‟.
Thomas (2010: chapter 5) states that “the high-level feasibility is your first financial
assessment of whether your vision is viable” and that the only way of conducting such a
study effectively is through making assumptions based on the vision and objectives of the
project. Thomas (2010: chapter 5) continues by defining a high-level feasibility study as
containing the following four components:
1. Acquisition cost: This is not only the actual cost of the land but includes all costs that
are incurred in order to acquire the land;
2. Planning cost: These costs include all planning cost such as initial feasibility study,
engineer, architect and consultant costs which have been incurred in planning the
proposed development;
3. Construction costs: These are costs incurred during the construction phase such as
certificates, permits, demolition and all other building expenses, and
4. Selling costs: “These are all the costs associated with realising the profit of the
development, which give you an accurate business case”.

27. 14
2.7 Risk, uncertainty and risk management
2.7.1 Cognitive risk in real estate
According to Wofford, Troilo and Dorchester (2010: 269) one of the greatest risks in
property development is that presented by the limited human abilities with regards to the
interpretation and understanding of the real estate world due to the endless information and
influencing factors which need to be analysed to determine and manage risk and
uncertainty. This is commonly referred to as „cognitive risk‟ and needs to be carefully
managed by each and every professional operating in this sector of the industry. “When
placed within the context of real estate environment characterised by complexity,
dynamism and ambiguity, the variability produced by these cognitive variations can be
magnified in a nonlinear manner to produce significant risk exposure” (Wofford, Troilo &
Dorchester 2010: 274).
The human cognition has the potential to contribute significantly to the total risk exposure
or present in a development; it could be the cause of over or underestimating any one or
combination of factors having the potential of influencing or impacting on the
development, this is due to the fact that “total risk is the sum of the objective underlying
risk plus cognitive risk” (Wofford, Troilo & Dorchester 2010: 274). Ormerod (2005)
makes a similar statement which emphasises the importance of identifying and managing
cognitive risk - “failure is often cumulative, with smaller failures initiating an event
cascade of failures that culminate in much larger, possible catastrophic, failure”.
According to Reason (1997) cited by Wofford et al. (2010), failure has two distinct
components namely: “error reduction, reducing the number of errors, and error
containment, reducing the severity of errors that do occur”.
In order to begin to get a sense of managing cognitive risk, it is useful to understand how
cognitive risk manifests itself in errors or failure. Understanding error types is important
to developing approaches to reducing the probability of failure and formulating strategies
to responding to failure when it occurs (Wofford et al., 2011).

28. 15
Working in the field of human factors and human error Reason (1990) & Wofford (2011)
has developed a three category typology in which errors or failure are labelled as skill-
based, rule-base, and knowledge-based.
Table 2.1: Summarizing the distinctions between skill based, rule based and knowledge
based errors (Reason, 1990).
2.7.2 Risks and uncertainty in property valuations
There has been some confusion regarding the terms risk and uncertainties as the terms are
very often not only used interchangeably, but the definitions often overlap to some degree
and therefore results in confusion (Lorenz, Truck & Lutzdendorf, 2006: 404).
According to French and Gabrielli (2004: 485 cited by Lorenz et al., 2006: 404), „risk‟ is
“the measurement of a loss identified as a possible outcome of the decision” and then
defines „uncertainty‟ as “anything that is not known about the outcome of a venture at the
time when the decision is made.”

29. 16
However, Adair and Hutchison (2005: 255-256 cited by Lorenz et al., 2006: 404) defines
„risk‟ in the context of the property market “as the probability that a target rate of return
will not be realised” and continues by stating that the variables regarding risk and their
probability of being realised are known. Adair and Hutchison (2005: 255-256 cited by
Lorenz et al., 2006: 404) clearly distinguish between risk and uncertainty by stating that
uncertainty “denotes situations where outcomes and their probabilities are known.”
Risk and uncertainty are inherent parts of the valuation process of real estate as often the
valuer is unable to specify and price accurately all current and future influences on the
value of the asset. While the final single point estimate of value may become a statement
of fact in the minds of the users of the valuation, it nevertheless remains the opinion of an
expert. Indeed the large number of academic and practice based studies into valuation
variance confirm the subjective nature of property asset pricing (Adair, Hutchison,
MacGregor, McGreal & Nanthakumaran, 1996).
Investment decision-making is concerned with choosing optimal levels of both return and
risk; the risk return trade off. Consequently the principle source of uncertainty is time as
the forecasting of future events is difficult and becomes more unreliable as time elapses.
Uncertainty therefore arises due to a lack of knowledge and information, on this basis
constructs a spectrum of uncertainty (Hargitay & Yu, 1993).
Adams (2005: 1 cited by Lorenz et al., 2006: 404) along with Chicken and Posner (1999
cited by Lorenz et al., 2006: 404) suggests that risk is in the mind and in the future,
therefore it exists only in the imagination. Chicken and Posner (1999 cited by Lorenz et
al., 2006: 404) however defines what risk consists of rather than defining the term itself
through the following simple equation:
Risk = Hazard x Exposure
Risk
Adair and Hutchison (2005 cited by Lorenz et al., 2006: 407) and Hutchison, Adair &
Leheny (2005 cited by Lorenz et al., 2006: 407) argues that the most effective way to
identify, address and communicate risk factors in the context of property valuations is by
use of the risk scoring method; this also provides for a basis on which more informed
decisions can be made with regards to the various risk areas of influence on the

30. 17
respective property. “They introduce „property risk scoring‟ (PRS) that involves the
analysis of the risks associated with the property asset under four key headings:
1. Market transparency risk;
2. Investment quality risk;
3. Covenant strength risk, and
4. Depreciation and obsolescence risk.
The risks are identified and rated in this method within the various groups by allocating a
number to it within a range from 1 (minimal risk) to 5 (high risk).
According to Hutchison et al. (2005: 150 cited by cited by Lorenz et al., 2006: 407), the
purpose of the PRS is to record the current risk perception of the investment attributes of
the investment property on the date of valuation, based on its specific characteristics and
current state of the market”.
Adair and Hutchison (2005 cited by Lorenz et al., 2006: 407) acknowledges that the PRS
is still not perfected and more research is required to perfect the model but despite of this
“the property risk score represents a potential method of applying a business risk
indicator which is simple for end user to understand”.
Hutchison & Nanthakrmaran (2000) Mallinson & French (2000) examine issues relating
to market efficiency, individual and market worth, and risk analysis. They argue that by
explicitly focusing on the risks associated with the estimation of the variables valuers and
investors obtain a better understanding of the nature of the investment and the range of
the outcomes. The risk of mispricing in the property market primarily arises from
differential access to available information or from the inefficient use of the information.
All valuations are subject to uncertainty, therefore the main problem with the approach is
the accuracy of the estimates.

31. 18
2.7.3 Risk management
Risk management as a function has shifted to another level of importance, particularly
after the onset of the recent worldwide financial crisis, but even before the financial
turmoil risk management was already widely used in many industries. Recent studies,
however, have shown that, in comparison with other industries, risk management has, thus
far, not been sufficiently adjusted to the real estate asset class. In this context, the author
has surveyed the present state of risk management practices of real estate investors
(Donner & Bauer, 2009).
Fisher & Robson (2006) pointed out that risk is an ever-present aspect of business, and risk
taking is necessary for profit and economic progress. Speculative property development is
popularly perceived as a „risky business‟ yet, like other entrepreneurs, developers have
opportunities to manage the risks they face; techniques include phasing and joint ventures.
Risks or problems can be reduced by management through taking responsibility and
fulfilling the functions of planning, organising, controlling and monitoring effectively to
prevent exposure to risk. “To do this requires identification of the hazard, an assessment of
the extent of the risk, the provision of measures to control the risk and the management of
any residual risk” (Cooke & Williams 2004: 74).
There are different models which are proposed for risk management. For example, IPD
(2000) used a three-step model with the following stages: risk identification, risk
measurement and risk control. Levisohn (2004) and Donner & Bauer (2009) described
eight components of Enterprise Risk Management: internal environment, objective setting,
event identification, risk assessment, risk response, control activities, information and
communication, and monitoring.
Fisher & Robson (2006) suggests that the decision making regarding risk follows a process
which starts with the identification of all possible risks and describing these, the process
followed to enable an informed decision to be made is illustrated in Figure 2.2.

32. 19
Figure 2.2: The management of risk (Frosdick, 1997)
“The first risks surface as the project is conceived, the business case is constructed, and the
goals for cost, schedule, and product scope are developed” (Verzuh, 2003: 181). Risk
identification is the first and most important step towards effective risk management
whereby possible hazards are identified and allows for provisions to be formulated (Cooke
& Williams 2004: 73).
Thompson and Perry (1992) reinforces the aforementioned by agreeing to the fact that
uncertainty is at its greatest at the initial stages of projects and this could easily lead to
both „time and cost overruns‟ which invalidate the client‟s business case and thereby
taking a potentially profitable venture and turning it into a loss-maker. They identify the
following risks as being most detrimental to the client‟s business case:
 Failure to keep within the „cost‟ estimate;
 Failure to achieve the required completion „date‟, and
 Failure to achieve the desired „quality‟ and functional requirements.
Cloete (1999: 124-125) contributes to this by stating that developers are most concerned
with the „down-side‟ of risks which is primarily that of not realising the expected and
estimated profit in a development.

33. 20
According to Cloete (1999: 124-125) two devastating factors with regard to the
profitability of a development are cost overruns and changes in the market and therefore
identifies three types of risks:
1. Legal risks: These risks hold large expenses when realised and therefore an accurate
estimation in this regard is vital. Research needs to be done on public opinion,
thoughts of those close to the development needs to be investigated and a thorough
analysis of any possible objections to the development;
2. Market risk: The two markets concerned are both the rental and equity markets, these
markets are closely related and interrelated whilst being ever-changing. “These
markets are of prime interest to the developer, since the value of the development is
determined, among others, by the rental income it will produce”, and
Figure 2.3: Typical pattern of market risk and value during the development period
(Cloete, 1999: 125)
3. The developer is still at risk of not making a profit from the development even after
assessing the legal, demand and markets accurately; the cost of producing the space
and the correct estimation of these costs are of utmost importance.

34. 21
“In times of inflation, costs frequently change during the course of development. The
longer the development period, the greater the risk”.
„Market maturity‟ is a concept that has been a very useful tool that explains structural
changes that takes place in the property markets, it also attempts to explain the attributes of
these changes in different places (D‟Arcy & Keogh 1999; Keogh & D‟Arcy 1994).
Guy & Henneberry (2002: 224) defined „maturity‟ as being a “function of the degree of
diversification of user and investor opportunities, flexibility of adjustment of property
interests, market openness, the existence of information and research systems,
professionalization of market players, and standardisation of property rights and market
practices”.
According to Pinkerton (2003: 80-81), real option valuation (ROV) is one of the promising
methods used to assess risk, ROV uses a variety of complicated models which weighs all
possible scenarios and outcomes relative to the project throughout its lifetime.
A „free market system‟ however is where there is limited influence and involvement by
government in the economy, which allows for private ownership; the key feature in this
model is that of „free enterprise‟. This enables private individuals to acquire resources,
organise the resources and then sell the product in a way that they choose (Meyers, 2011:
16).
Therefore consumer sovereignty is referred to by economists as the final purchaser;
therefore the final purchaser of the product is the one who eventually rules the market. The
third crucial feature of this model is the price mechanism; prices are used to indicate value
and thereby serve as a guide to what the purchaser prefers (Meyers, 2011: 16).

35. 22
Figure 2.4: The free market system
(Meyers, 2011: 16)
Table 2.2: Five stages of development and the trade-offs between return, risk and control.
Tasks Acquisition Planning Building Operations Recycling
* Establish * Rezone * Construct * Maintain * Repeat
market * Design * Lease refinance tasks
position * Finance
* Capitalise
project
Level of High Moderate High Low High
risks
Risk * Develop * Verify * Obtain * Select * Rethink
Reduction alternative development gaurantees manager development
Measures scenarios concept * Plan for * Establish concept
* Select * Analyse contingencies reporting
developer market
* Prelease
major procedures
* Watch intelligence tenant space
market * Establish
marketing
programme
Source: Cloete (1999: 124)

36. 23
2.8 Project management
Dobson and Leemann (2010: 6) states that all projects take place under certain constraints;
these however vary according to difficulty and uncertainty levels which may be realised
during the project. “Effective management requires control but all contractors have different
ideas on the degree of control necessary for the projects they undertake” (Cooke and
Williams, 2004: 332-371).
According to Bryde (2003: 775), the practices of project managers has changed dramatically
over the past decade, this raised the need for the academic discipline to constantly update
and stay in touch with the changes in practice to maintain relevance.
Aldhfayan (2008: 1) confirms this by stating that project management has evolved in the
21st century due to challenges such as changing market conditions and the need for
technology innovation, this lead to project managers developing themselves “into an
independent profession as other professionals such as Certified Financial Analysts (CFAs)
and Certified Public Accountants (CPAs)”.
According to Petersen (2009: 1), however the redefining of project management has
identified the misconception with regards to „project management‟ where individuals
immediately think of budgets; however none of the tools available to the project manager
can be effective without the appropriate people to implement them. It is therefore clear that
in order to be a successful project manager and have successful projects the project manager
needs to lead a team with suitable employees, the team will be his „most valuable asset‟.
“Successful project management requires a good mix of both leadership and management to
avoid bureaucracy or volatility during the project lifecycle. Project managers should be the
personification of both of these skill sets” (Petersen, 2009: 1).
According to Bacca (2007: 4), project management involves all actions required to take a
project from start to finish, whilst achieving the project specific objectives, these actions
will revolve around the project manager.

37. 24
Bacca (2007: 4) continues by identifying eight elements which form an integral part of the
project manager‟s role within a project:
1. Communicator;
2. Analyst;
3. Strategist;
4. Coordinator;
5. Documenter;
6. Problem solver;
7. Manager, and
8. Leader.
Dobson and Leemann (2010: 4) however recognise four essential project questions that need
to be asked when approaching a project although they often aren‟t:
1. “Why are we doing this? (business case)”;
2. “Who has an interest in what we‟re doing, and what do they each want and need?
(human and organizational aspects)”;
3. “What do we have to do, and how are we going to do it? (project management,
including planning and quality control)”, and
4. “Who needs to be involved, and in what way? (top management and user involvement
and support)”
Bacca (2007: 11-12) and Burke (2003: 28-29) agrees that a project will pass through four
distinct phases which is described as the „project life-cycle‟, the four phases are divided as
follows:
1. Concept and Initiation Phase: This phase will start off the project with the feasibility
study and the acceptance of the project (Burke, 2003: 28-29);
2. Design and Development Phase: This is the planning phase of the proposed project and
all planning processes will be completed in this phase (Bacca, 2007: 11-12);
3. Construction Phase: This phase “implements the project as per the „baseline plan‟
developed in the previous phase” (Burke, 2003: 28-29);
4. Commissioning and Handover Phase: The final phase is where the “closing processes
are done” (Bacca, 2007: 11-12).

38. 25
Cooke and Williams (2004: 332-371) however goes one step further by identifying three
essential areas in construction projects which needs to be closely considered and controlled:
1. Time:
a. The role of the programme;
b. Progress recording;
c. Delay and disruption, and
d. Extensions of time.
2. Money:
a. Cost: which is the money out;
b. Value: which is the money in, and
c. Cash Flow: this is the difference between the aforementioned.
3. Resources:
a. Labour: which includes both direct employed and subcontract labour;
b. Materials: which focuses on control of material waste on site;
c. Plant, and
d. Preliminaries.
When considering the abovementioned essential areas it is interesting to note that according
to Kini (2000: 1) the reason why project management will „no longer be business as usual‟
is because of the ever changing and evolving global market in the 21st century with the
major influence being the customer. They are expecting lower costs, reduced construction
periods along with quality resources to produce a quality final product.
According to Kini (2000: 1) there are six distinct areas which will lead to this change and
they are necessary to ensure continued customer satisfaction and overall project success,
these areas are:
1. Companies will need to ensure that they have an organisation which can cost-
effectively meet their expertise and expectations;
2. It is vital to recruit a fast and reliable information technology (IT) system for all
communications between the company, client and team;
3. Company staff will need to be creative and think globally;
4. Effective and innovative use of suppliers to facilitate the construction process and
schedule;

39. 26
5. It is imperative that there is thorough knowledge and appreciation of material and
construction techniques to generate a competitive advantage, and
6. The last but most crucial of all is ensuring the final product is of high quality.
Ribeiro (2010: 361) however argues that the construction industry has many factors
influencing it both positively and negatively, due to this it is “increasingly important to
anticipate risks and implement the best solutions”. Ribeiro (2010: 361) then concludes that
“the preparation of the project before execution is crucial for any construction firm” to
ensure that the final project delivered meets the initial expectations.
Ireland (2006: 2) argues that the “future improvements in project management may be made
through better tools and practices, but the one area ripe for change is the project team”. He
goes on to state that the project leader is therefore responsible for achieving high
performance levels through the project team when they are well-led. Lew (2006: 3) however
states that project managers will have to realise the importance of leadership skills; Project
manager competence will include the ability to effectively lead teams and motivate
individuals in the performance of project work.
RIBA (2005) has identified the drivers of change within the built environment, which will
have a direct impact on the construction project manager; the changes in the construction
industry are not limited to:
1. New procurement methods;
2. Sustainability in construction;
3. The changes in both the relationships and structure of the supply chain and multi-
disciplined professional team;
4. Challenges presented by government, the public and competitive nature of the industry;
5. A major change in the increased use of IT;
6. Globalisation is another major game changer by „reducing‟ the distance between
countries leading to increased competition, and
7. The ever rising power exercised by consumers along with increased scrutiny and high
levels of expectations.

40. 27
Naoum (1994 cited by the Construction Research Congress, 2012: 429-430) however
identifies the most important change drivers in construction project management in short;
there are however similarities with the first change driver being inefficient and ineffective
communications. Secondly the changing environment and lastly the ever increasing project
complexity and its implications. He goes one step further by concluding that the requester of
these changes come from one of three or a combination of the owner, designer and/or the
contractor himself.
2.9 PESTEL Analysis
According to Evans and Richardson (2007), an environmental analysis should identify any
key external factors that require some form of organizational action. The PESTEL analysis
is a strategic planning technique that provides a useful framework for analysing the
environmental pressures on a team or an organisation. A PESTEL Analysis can be
particularly useful for groups who have become too inward-looking (Rogers, 1999). The
PESTEL Analysis contains six distinct environmental pressures and they are defined by
Evans and Richandson (2007) as:
1. Political
This covers any political influences such as a change in government
2. Economic
This includes any changes in public spending, interest or exchange rates, and the
climate for business environment
3. Legislative
Legislative will include any new legislation which could affect the project
4. Environmental
The environmental factors can deal with green policies and any other environmental
policies
5. Technological
This may include any new products and services, or new approaches to research and
development activity
6. Social
The social factor includes changes in lifestyles, attitudes, buying habits or demographic
changes, such as extended life expectancy and the growth of the „grey‟ market

41. 28
3 CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
The research methodology adopted in this study comprises of a quantitative method with
two types of data namely primary and secondary data. The primary data were obtained by
means of a study-specific electronic questionnaire and then compared to the secondary data
in the study which in turn then forms the basis of this study. The secondary data in the study
were acquired from numerous sources of information and research.
3.2 The Data
The study and its findings was based on gathering and analysing of primary and secondary
data, with the secondary data establishing criteria the primary data can then be analysed and
interpreted, enabling the testing of the study specific hypotheses.
3.2.1 Primary data
The primary data consist of a questionnaire that was sent to various respondents as
identified in the delimitations. The electronic questionnaire was sent via e-mail to facilitate
and simplify the distribution and responding process. The primary data in the form of the
questionnaire was structured in accordance with the problems, sub-problems, objectives
and hypotheses identified in the study. The questionnaires accompanied by a cover letter
that stated the importance and purpose of the study were distributed to property
developers, project managers and other relevant professionals within the built
environment, who would have the required knowledge and experience to complete the
questionnaires with confidence; this is essential for the findings to be „reliable and viable‟.
The respondents were assured of utmost anonymity and confidentiality with regards to
their participation.
3.2.2 Secondary data
Secondary data were obtained from a variety of sources such as books, journals,
magazines, articles and conference papers, which were retrieved from the NMMU library
as well as the NMMU library online databases. The sources that were used in the study
were filtered according to the date of publication and relevance to the field of study to
enable the testing of the primary data.

42. 29
3.3 Method
The study consisted of quantitative data, which were collected, analysed and interpreted. It
is vitally important to the credibility of the study that the research methodology and data is
not only reliable but also viable to enable the best possible results and findings.
The method included quantitative data collection through the questions set in the electronic
questionnaire to be sent to the respondents. The quantitative data were gathered through
closed questions, which will enable thorough statistical analysis and interpretation of the
collected data.
3.4 Sample stratum
The sample of the study was according to the aforementioned delimitations. The
respondents were Built Environment professionals who are still actively involved in their
respective profession; this is crucial for obtaining data which is not only current but also
reliable.
Table 3.1 Response rates
Population
Not
operational
Unable
to
Valid
sample No. of
No.
included Response
size anymore assist size respondents in analysis rate %
120 12 17 91 29 29 31.86%
3.5 Questionnaire design
The questionnaire consisted of four sections:
1. Section 1 contain the demographic information of the respondent namely; age, gender,
current position of employment, number of years in the industry and so on.
2. Section 2 contain the evidence in the form of closed questions to be answered by the
respondents. The questions in this section were based on the five-point likert as follows:
 1 (minor) to 5 (major);
 1 (never) to 5 (always), and
 An „unsure‟ option was also provided for all the questions to facilitate the data
being as accurate as possible.

43. 30
3. Section 3 made provision for the respondent to comment on the nature and content of
the questionnaire along with the relevance of the questionnaire with regards to the
research topic.
4. Section 4 made provision for the respondents to enter their personal details.
Table 3.2 indicates how the questionnaire was compiled with respect to each of the
respective sub-problems and hypotheses.
Table 3.2 Questionnaire layout according to sub-problems and hypotheses.
Sub-problem: Hypotheses
Question no. 1 2 3
1 X X X
2 X X X
3 X
4 X X
5 X
6 X
7 X X
8 X X
9 X X X
10 X X X
3.6 Questionnaire administration
The questionnaires needed to be drawn up by the 29th
of June 2012 and collected by 31ste
of
August 2012, a minimum of 20 questionnaires were required to be completed and returned
for the study to be carried out thoroughly.

44. 31
3.7 Ethical considerations
All information gathered from the respondents in the questionnaires was kept strictly
confidential. All respondents were made aware of the purpose/aim of the study and had the
opportunity to withdraw from participating in the study at any point in time and no
respondent was obligated to partake in the study.

45. 32
4 CHAPTER FOUR: RESULTS AND FINDINGS
4.1 Introduction
The statistical results that were gathered from the questionnaire were analysed and
interpreted in this Chapter of the study with specific focus on each question contained in the
questionnaire. The data were used to analyse the statistical results to establish the extent to
which the identified sub-problems were relevant within the context of „risks associated with
property development‟.
The evaluation of the hypotheses was then presented.
The terms, which will be used to comment on the interpreted data as well as during the
process of testing the hypotheses include:
 Minority - 33.3% and less;
 Less than half - 33.4% and more, but less than 50;
 Half - 50%;
 More than half - more than 50%, but less than 66.6%;
 Majority - 66.7% and more, but less than 80;
 Most - 80% and more, but less than 100, and
 All - 100%.
The questionnaire design was based on the five-point Likert scale that enable the respondent
to indicate the extent he agrees, disagrees, can relate to or experiences the parameters within
the respective question. The Likert scale therefore allows him/her to answer the question by
selecting from a range of 1 never/minor to 5 always/major and the „unsure‟ option for those
respondents who can‟t answer or fails to understand the specific question.

46. 33
Table 4.1 Ranges and categories of „mean scores‟.
Range Categories
> 4.20 ≤ 5.00
Near major / major impact
Often to always / always
> 3.40 ≤ 4.20
Impact near to major / near major impact
Sometimes to often / often
> 2.60 ≤ 3.40
Near minor impact / impact
Rarely to sometimes / sometimes
> 1.80 ≤ 2.60
Minor to near minor / near minor impact
Never to rarely / rarely
> 1.00 ≤ 1.80
Minor to near minor impact
Never to rarely
4.2 Survey results and findings
The following section contains the results from the electronic questionnaire that was used
during this survey and is attached as appendix A. The structure and numbering of this
section is consistent with that used in the questionnaire to facilitate the correlation or
relationship between the data and findings.
4.2.1 Section 1: Demographic information of respondents
The analysis of demographic information regarding the respondents in this survey is
necessary to establish who the respondent is, in what capacity he operates within the
industry and his level of experience. This is required for ascertaining that the respondents
are stakeholders in the built environment.

47. 34
1. Select from the list below the extent and capacity in which you operate as a property
developer, property development manager or construction project manager in your
organization.
Table 4.2 indicates the professional capacity in which the various respondents operate within
the industry as property developers. It is notable that the category with the highest percentage
of respondents was project managers (35%). Managing directors were second (17%) with a
fairly even split between engineers (10%) and quantity surveyors (10%). Estate agents (7%)
were the least represented professional group.
Table 4.2 Professional capacity of the respondent
Professional capacity
Managing
Engineer
Quantity Estate Construction Project
Other
Director Surveyor Agent Manager Manager
Total 5 17% 3 10% 3 10% 2 7% 2 7% 10 35% 4 14%
2. Please indicate the number of years with the current organization (or own company).
Table 4.3 indicates the number of years the respondents have been with their current employer.
It is notable that the highest percentage of respondents (36%) have only been with the current
organization for a period of 5-9 years and second highest (25%) have been with the current
organization for a period of 1-4 years. This suggests that there is a fair amount of movement
between organizations in this profession. It should be noted however that 39% of the
respondents have been with their current organization for a period of more than 10 years.
Table 4.3 Number of years with the organization
Number of years with organization
1-4 5-9 10-19 20-29
More than
30
Total 7 25% 10 36% 4 14% 5 18% 2 7%

48. 35
3. Please indicate the number of years in the construction industry.
Table 4.4 indicates the number of years that the respondent has been operating within the
construction industry and once again as in the case of Table 4.3 it is notable that the category
with the highest percentage of respondents (44%) has 5-9 years experience in the industry.
However, the second highest (26%) is 10-19 years. In addition, 41% of the respondents have
been operating within the construction industry for a period of more than 10 years.
Table 4.4 Number of years in the construction industry
4. Please indicate the number of years as a property developer, property development manager
or construction project manager.
Table 4.5 indicates the number of years that the respondent has been operating as a property
developer, property development manager or construction manager. As in the case with Table
4.4 the highest percentage of respondents (48%) was in the period of 5-9 years, which once
again could suggest a lack of extensive experience amongst the respondents.
Table 4.5 Number of years as a property developer, property development manager or
construction project manager
Number of years as a PD, PDM or CPM
1-4 5-9 10-19 20-29
More than
30
Total 10 37% 13 48% 4 15% 0 0% 0 0%
Number of years in construction industry
1-4 5-9 10-19 20-29
More than
30
Total 4 15% 12 44% 7 26% 1 4% 3 11%

49. 36
5. Please indicate your level of education obtained.
Table 4.6 indicates the level of education that the respondents have. It is notable that the
highest percentage of respondents (35%) have National Diplomas and in second place (24%)
were BSc degrees holders. However, it should also be noted that 41% of the respondents have a
level of education of BSc (Honours) or higher. This is therefore clear evidence that the
respondents are well educated with more than half (65%) having a degree or higher level of
education.
Table 4.6 Level of education of respondent
Level of education
Grade 9 Matric
National
BSc BSc (Hon)
Masters Doctorate
Diploma Degree Degree
Total 0 0% 0 0% 10 35% 7 24% 5 17% 6 21% 1 3%
6. Please indicate the annual business value generated by the organization or company.
Table 4.7 shows the annual business volume that is generated by the organization for which the
respondent works. It is very notable that highest percentage of respondents (39%) indicated a
value of 60 million or more and more than half (55%) a value of more than 20 million. This
suggests that the organizations in general are fairly large especially when considering the
prevailing economic conditions in South Africa.
Table 4.7 Annual business volume generated by the organization
Annual business volume (million)
0-5 5-10 10-20 20-40 40-60 More than 60
Total 7 27% 2 8% 3 12% 3 12% 1 4% 10 39%

50. 37
7. Please indicate your gender.
Table 4.8 indicates the gender of the respondents and it is not surprising that most of the
respondents (90%) were male; this is one area within the construction industry in South Africa
which is being addressed at the moment. There are clear opportunities for women to get more
involved in the industry.
Table 4.8 Gender of respondent
Gender
Male Female
Total 26 90% 3 10%
8. Please indicate your age.
Table 4.9 indicates the age of the respondents and it is quite interesting that the highest
percentage of respondents (35%) are 50 years or older. Also notable is the fact that more than
half (56%) of the respondents are 40 years or older. This result is instructive as it contradicts
the results which were obtained in Tables 4.4 and 4.5; it is also the probable reason why in
Table 4.6 24% of the respondents have obtained a Masters or Doctorate degree. When one
takes into account the combined results of table 4.4, 4.5, 4.6 and 4.9, it can be argued that the
respondents are well qualified and should have a sufficient amount of experience and
knowledge to complete the questionnaires competently.
Table 4.9 Age of respondent.
Age (years)
20-30 30-40 40-50
Older than
50
Total 7 24% 6 21% 6 21% 10 35%

51. 38
4.2.2 Section 2: Evidence from questionnaires
1. Indicate to which extent your organization is involved with each of the following forms of
development from 1 (minor) to 5 (major) (please note the ‘Unsure’ response).
Table 4.10 indicates the extent to which the respondents‟ organization is involved in the
various forms of development. The responses are tabulated in terms of percentage responses
within a range of 1 (minor) to 5 (major) and a mean score ranging from 1 to 5. It is notable
that erecting of completely new buildings is ranked first with a mean score (MS) of 4.03. The
developments which are undertaken by the surveyed respondents are therefore more than half
(58.6%) for the erecting of new buildings, it is important to establish this as the three forms of
development each has risks and characteristics that are uniquely attributable to them. Ranked
second is the refurbishment of existing buildings with a mean score of 2.86 and ranked third
is the demolishing and construction of new buildings with a mean score of 2.38.
Table 4.10 Extent of involvement in various forms of development
Forms
Response (%)
Mean Rank
Unsure
Minor…….……………….…… Major
1 2 3 4 5
Erecting of completely
new buildings
0.0 6.9 6.9 20.7 6.9 58.6 4.03 1
Demolishing and
construction of new 4.0 44.0 12.0 16.0 8.0 16.0 2.38 3
buildings
Refurbishment of
existing buildings
0.0 30.4 8.7 30.4 17.4 13.0 2.86 2

52. 39
2. With reference to the previous question indicate the extent to which your organization is
involved in the following two sectors from 1 (minor) to 5 (major) (please note the ‘Unsure’
response).
Table 4.11 indicates the sector within which the organization of the respondent operates. The
responses are tabulated in terms of percentage responses within a range of 1 (minor) to 5
(major) and a mean score ranging from 1 to 5. The private sector is raked first with a mean
score of 4.00. This is another crucial statistic as the nature of private and public developments
along with the risks associated with each differ considerably. The respondents therefore
mainly operate within the private sector and are involved with the development of completely
new buildings within this sector.
Table 4.11 Extent of involvement in the different sectors
Sectors
Response (%)
Mean Rank
Unsure
Minor…….……………….…… Major
1 2 3 4 5
Private sector 0.0 10.7 10.7 10.7 17.9 50.0 4.00 1
Public sector 7.7 30.8 26.9 7.7 7.7 19.2 2.65 2
3. On a scale of 1 (never) to 5 (always) how often are a projects actual results not in synergy
with the initial feasibility projections of the project (please note the ‘Unsure’ response)?
Table 4.12 indicates how often the organization of the respondents experience non alignment
of project results with the initial feasibility projections. The responses are tabulated in terms
of percentage responses within a range of 1 (never) to 5 (always) and a mean score ranging
from 1 to 5. Given that the mean score is 2.69, the regularity with which synergy is not
realized between actual project results and feasibility projections can be deemed to be from
sometimes to often.
It is notable that 34.5% of the respondents recorded a score of 3 which is the midpoint and
more than half (62%) recorded a score of 3 or higher, this suggests that there certainly exists
risk with regards to the feasibility projections and the actual results realized on projects due to
the countless variables which are involved in development projects.

53. 40
Table 4.12 Actual project results compared to projections
Response (%)
Mean
Unsure
Never …………………………….Always
1 2 3 4 5
3.4 17.2 17.2 34.5 24.1 3.4 2.69
4. With reference to the previous question to which extent do the following parameters
contribute towards synergy not realized in the project from 1 (minor) to 5 (major) (please
note the ‘Unsure’ response)?
Table 4.13 indicates the extent to which the respondents find that the parameters listed in the
question contribute towards synergy non realisation of projects between feasibility
projections and actual results. The responses are tabulated in terms of percentage responses
within a range of 1 (minor) to 5 (major) and a mean score ranging from 1 to 5. The two
parameters which are both ranked first with a mean score of 3.00 (> 2.60 ≤ 3.40) are
„changing market conditions‟ and „unforeseen circumstances‟ which means the extent to
which these parameters contribute are a near minor impact / impact. Ranked second is
inadequate feasibility projections with a mean score of 2.62 (> 2.60 ≤ 3.40), which also has a
near minor impact / impact contribution towards the synergy not being realized.
It is notable that the parameters had the following percentage responses, which were rated
either 3 or higher out of the 5 point scale:
 Inadequate feasibility projections - 51.6%
 Changing market / economic conditions during the project - 55.2%
 Unforeseen circumstances - 57.1%
With all three parameters having a percentage above 50%, this could suggest that the projects
actual results are more than half the time not in synergy with the feasibility projections which
were made on the project.

54. 41
Table 4.13 Contributors to not realizing project projections
5. On a scale of 1 (never) to 5 (always) how often does the actual project duration exceed the
estimated project duration (please note the ‘Unsure’ response)?
Table 4.14 indicates the regularity with which the respondents‟ organization experiences
project time overruns, this is where the time initially allowed for the project is exceeded by
the time the project is completed. The responses are tabulated in terms of percentage
responses within a range of 1 (never) to 5 (always) and a mean score ranging from 1 to 5.
Given that the mean score is 3.41 (> 3.40 ≤ 4.20), the extent to which actual project duration
exceeds the estimated project duration is sometimes to often. It is notable that more than half
(51.7%) of the respondents recorded a score of 4 and most (82.7%) a midpoint score of 3 or
higher.
This suggests that the estimated project duration is more often than not exceeded by the time
a project reaches completion. This presents many problems for the developer with regards to
escalation, preliminary and generals as well as many other costs, which are time related and
calculated accordingly.
Table 4.14 Project duration comparisons
Response (%)
Mean
Unsure
Never …………………………….Always
1 2 3 4 5
0.0 0.0 17.2 27.6 51.7 3.4 3.41
Parameter
Response (%)
Mean RankUnsure
Minor………………….…… Major
1 2 3 4 5
Changing
market/economic
0 17.2 20.7 20.7 27.6 13.8 3.00 1
conditions during the
project
Unforeseen
circumstances 0 14.3 28.6 17.9 32.1 7.1 3.00 2
Inadequate feasibility
projections
0 20.7 27.6 24.1 24.1 3.4 2.62 3

55. 42
6. With reference to the previous question to which extent do the following parameters result in
actual project duration exceeding estimated project duration 1 (minor) to 5 (major)(please
note the ‘Unsure’ response)?
Table 4.15 indicates the extent to which the respondents‟ organization finds the listed
parameters responsible for the actual project duration exceeding the estimated project
duration. The responses are tabulated in terms of percentage responses within a range of 1
(minor) to 5 (major) and a mean score ranging from 1 to 5. Given the mean score of 2.93
(> 2.60 ≤ 3.40) „client demands cannot be accommodated‟ is ranked first amongst the
parameters. Ranked second is „inadequate project management‟ with a mean score of 2.83
(> 2.60 ≤ 3.40) in respect of the other parameters. It is notable that for both „inadequate
project management‟ and „client demands cannot be accommodated‟ more than half the
respondents (51.6% and 57.1%) respectively recorded a score of 3 or higher which can lead to
the conclusion that more than half the time estimated project duration is exceeded due to the
aforementioned parameters. The „client demands cannot be accommodated‟ which is ranked
first is largely due to clients putting too tight a squeeze on cost and time allocated to the
project, which in turn leads to numerous other problems such as poor quality workmanship on
final product.
Table 4.15 Parameters influencing project duration
Parameter
Response (%)
Mean RankUnsure
Minor…….…………….…… Major
1 2 3 4 5
Clients demands cannot
3.6 10.7 28.6 25 21.4 10.7 2.93 1be accommodated
Inadequate project
0 13.8 34.5 17.2 24.1 10.3 2.83 2management

56. 43
7. On a scale of 1 (never) to 5 (always) how often are unforeseen circumstances not identified
within an acceptable property development model for perceived success (please note the
‘Unsure’ response)?
Table 4.16 indicates the regularity with which unforeseen circumstances realized in a project
were not identified with the use of an acceptable property development model for perceived
success. The responses are tabulated in terms of percentage responses within a range of 1
(never) to 5 (always) and a mean score ranging from 1 to 5. Given the mean score of 2.66
(> 2.60 ≤ 3.40) indicates that the aforementioned occurs sometimes to often. With the highest
percentage of respondents (31.0%) recording a score of 3 out of 5 and 58.5% of the
respondents recording a score of 3 or higher, it suggests that more than half the time
unforeseen circumstances are having a negative impact on projects because they were not
identified within an acceptable property development model for perceived success. The
combined results of Table 4.13 and 4.16 therefore indicates that unforeseen circumstances
which are not adequately and comprehensively identified beforehand does present and/or
contribute a considerable amount of risk to the development.
Table 4.16 Regularity of unforeseen circumstances
Response (%)
Mean
Unsure
Never …………………………….Always
1 2 3 4 5
6.9 10.3 24.1 31.0 24.1 3.4 2.66
8. With reference to the previous question rate the following parameters of PESTEL analysis
according to shortcomings realized in each from 1 (minor) to 5 (major) (please note the
‘Unsure’ response).
Table 4.17 indicates that the extent to which the listed parameters are found wanting when the
project projections are compared to the actual outcomes on completion of the development,
the parameters are the elements which form part of and are analyzed with the PESTEL
analysis. The responses are tabulated in terms of percentage responses within a range of 1
(minor) to 5 (major) and a mean score ranging from 1 to 5.

57. 44
Table 4.17 Parameters with potential shortcomings realized
Based on the ranking on the Table 4.17 it can be observed that only economic consideration is
deemed to have a significant impact. It is notable that often parameters failed to achieve mean
scores greater than 3.0, which suggests a near minor or minor impact.
9. Indicate how often the following parameters lead to time and cost overruns being
encountered in projects from 1 (never) to 5 (always) (please note the ‘Unsure’ response).
Table 4.18 indicates the degree or extent to which the listed parameters contribute towards
time and cost overruns being realized upon completion of the project, this invariably is the
extent to which the outcomes on the project exceeds the projected or estimated figures. The
responses are tabulated in terms of percentage responses within a range of 1 (never) to 5
(always) and a mean score ranging from 1 to 5. Given a mean score of 3.41 (> 3.40 ≤ 4.20)
and ranked first „client needs and demands‟ is the leading contributing factor according to the
surveyed respondents. The highest percentage of respondents (48.3%) allocated a score of 4
out of the 5 point scale as well as 58.6% of the respondents recording a score of 4 or higher
which suggests that there is a strong believe amongst them that this is the crucial determining
factor.
The risks involved here is that both the client and the developer is faced by economic
pressures as well as uncertainty about future economic trends and the client more often than
not seeks to transfer the risk to the developer where he then makes inadequate assessments or
allowances for these risks / uncertainties in order to obtain the contract.
Parameter
Response (%)
Mean RankUnsure
Minor…….…………….…… Major
1 2 3 4 5
Economic 0 6.9 13.8 37.9 37.9 3.4 3.17 1
Legislative 0 13.8 17.2 31 34.5 3.4 2.97 2
Environmental 0 6.9 27.6 34.5 27.6 3.4 2.93 3
Technological 0 17.2 37.9 27.6 17.2 0 2.45 4
Political 3.4 27.6 20.7 20.7 27.6 0 2.41 5
Social 0 17.9 39.3 39.3 3.6 0 2.37 6

58. 45
With a mean score of 2.97 and 2.93 „market and economic conditions‟ and „escalation‟ is
ranked 2nd
and 3rd
respectively.
Table 4.18 Projections and actual results differ, leading to time and cost overruns
Parameter
Response (%)
Mean RankUnsure
Never…….…………….…… Always
1 2 3 4 5
Client needs and demands 0 0 27.6 13.8 48.3 10.3 3.41 1
Market and economic
conditions 0 6.9 20.7 44.8 24.1 3.4 2.97 2
Escalation 0 3.4 37.9 31 17.2 10.3 2.93 3
10. With reference to the ‘previous’ question indicate the extent to which the above mentioned
parameters estimated/anticipated during the planning phase of a project differs from that
actually realized during and upon completion of a project from 1 (minor) to 5 (major)
(please note the ‘Unsure’ response).
Table 4.19 indicates the extent to which the listed parameters projections during planning
phase of a project differs from the actual results produced when a project is completed. The
responses are tabulated in terms of percentage responses within a range of 1 (minor) to 5
(major) and a mean score ranging from 1 to 5. Given the mean score of 3.24, „client needs
and demands‟ has a near minor / impact regarding projections being exceeded by actual
project results. What is notable is that this was also the case in Table 4.18 which suggests that
„client needs and demands‟ are not only the leading contributor in actual results differing
from projections but also most responsible amongst the listed parameters for time and cost
overruns.
Also notable is that the majority of the respondents (72.4%) recorded a midpoint score of 3 or
higher out of the 5 point scale for „client needs and demands‟. However the highest number of
respondents (50%) allocated a midpoint score of 3 for the „market and economic conditions‟
although the percentage of respondents recording a score of 3 or higher is less than for „client
needs and demands‟. It should be noted that although the mean score or „market and
economic conditions‟ is lower than that for escalation and therefore ranked lower it does have
a higher percentage of respondents recording a score of 3 or higher which could suggest that
it should be ranked 2nd
and not 3rd
which is the case in table 5.18.

59. 46
It can therefore be argued that the results in table 5.18 and 5.19 correspond with one another
and the listed parameters are to the same extent for which they are responsible for time and
cost overruns also the factors where deviation from estimates are encountered.
Table 4.19 Actual results deviating from estimates or projections.
Parameter
Response (%)
Mean RankUnsure
Minor………………….…… Major
1 2 3 4 5
Client needs and
demands 0 3.4 24.1 27.6 34.5 10.3 3.24 1
Escalation 0 3.4 41.4 27.6 17.2 10.3 2.90 2
Market and economic
conditions
0 10.7 25 50 7.1 7.1 2.85 3

60. 47
4.3 Hypotheses Testing
The primary data along with the review of related literature were used to test the hypotheses
which relate to each of the sub-problems. The findings are based mainly on developments in
the private sector and development of entirely new buildings.
Hypothesis one
Inadequate feasibility projections leads to the disparity between project projections and
actual.
Table 4.12 indicates that the feasibility projections or estimates of a project is exceeded by
the actual results on projects sometimes with a mean score of 2.69 along with 62% of the
respondents allocating a score of 3 or higher on the 5 point scale.
In support of this, Table 4.13 indicates that inadequate feasibility projections does present
a risk in development with a near minor impact / impact towards synergy not being
realized on projects regarding projections and results, a mean score of 2.62 along with
51.6% of the respondents recording a score of 3 or higher reaffirms this.
Table 4.13 indicates that market and/or economic conditions during the project do change
quite considerably with a mean score of 3.00 having a near minor impact / impact with
regards to its contribution towards feasibility projections not being in synergy with the
feasibility projections. This is supported by 55.2% of the respondents allocating a score of
3 or higher to this parameter along with it being ranked first amongst the parameters.
Maybe a better sign and confirmation of the aforementioned is found in Table 4.17 where
the economic element within the PESTEL analysis was listed first amongst the parameters
regarding shortcomings being encountered between projections and results with a mean
score of 3.17 having a near minor impact / impact.
Table 4.13 indicates that unforeseen circumstances was ranked first amongst the listed
parameters with a mean score of 3.00, this suggests that it contributes a great deal towards
the feasibility projections not being consistent with the results produced by the project
having a near minor impact / impact; it also had the highest percentage of respondents
(57.1%) allocating a score of 3 or higher to this parameter.

61. 48
In support of these results Table 4.17 indicates that unforeseen circumstances plays a
immense part in feasibility analysis within a perceived model for success not being
accurate and costly variations occurring.
The hypothesis is therefore partially supported by the findings obtained from the survey
and the related literature.
Hypothesis two
Changing market/economic conditions leads to time overruns in projects.
Table 4.15 indicates that „inadequate project management‟ may be responsible for project
time overruns as it had a mean score of 2.83, which was notable though is that the highest
percentage of respondents recorded a score of 2 out of 5 which could suggest that this
parameter is not the primary cause of project time overruns. However more than half the
respondents (51.6%) still recorded a score of 3 or higher, one can therefore argue that even
though „inadequate project management‟ is not the primary cause of time overruns it is
still amongst the top ranked causes. It could also be argued that „inadequate project
management‟ is one of the chief factors resulting in „client needs and demands‟ having
such an immense impact on the eventual project success due to lack of management
thereof. This can be seen in Table 4.18 and 4.19 where „client needs and demands‟ is
ranked first amongst the parameters as causes for project projections and results differing,
therefore leading to time and cost overruns.
Table 4.15 indicates that of the listed parameters „client demands cannot be
accommodated‟ was ranked first with a mean score of 2.93 giving it a near minor impact.
However, what should be noted is that more than half (57.1%) of the respondents allocated
a score of 3 or higher which could suggest the respondents believe that more than half the
time this is the factor leading to time overruns. In Table 4.18, „client needs and demands‟
were ranked first out of the listed parameters with a mean score of 3.41, meaning it
sometimes to often leads to project projections differing from actual results with regards to
time and cost factors. The highest number of respondents (48.3%) recorded a score of 4
from the 5 point scale along with 72.4% a score of 3 or higher, therefore the majority of
the respondents believe that this is a determining factor when trying to finish a project on
time and within budget.

62. 49
Table 4.19 reinforces this as „client needs and demands‟ was ranked first from the
parameters causing a deviation of project projections with project outcomes, a mean score
of 3.24 was recorded having a near minor / impact. It also had the highest percentage
respondents (72.4%) allocating a score of 3 or higher to this parameter indicating the
majority of the respondents encounter that it has a major impact on project success
regarding time and cost.
The hypothesis is therefore partially supported by the findings obtained from the survey
and the related literature.
Hypothesis three
Inadequate PESTEL analysis leads to the failure to capture unforeseen circumstances in
property development.
Table 4.17 indicates that the PESTEL analysis elements all had at least a minor to near
minor impact with shortcomings encountered within these elements with regards to not
adequately identifying influencing factors and/or circumstances during the initial project
analysis. The „economic‟ element (Table 4.17) was ranked first amongst the listed
parameters having a mean score of 3.17 and a near minor / impact; the majority of the
respondents (79.2%) allocated a score of 3 or higher which could be argued is a result of the
current harsh and fluctuating economy in South Africa.
More than half of the respondents (68.9%) allocated a score of 3 or higher to the legislative
element, which suggests that inadequate analysis / understanding of legislation along with
changing legislative circumstances / conditions is another vital factor contributing to the
shortcomings realized upon completion of a project.
The hypothesis is therefore partially supported by the findings obtained from the survey and
the related literature.