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Mar 2001 Vol. 5   No. 1

........   TEAM WORK  ........
The Real Estate Development & Investment Game Goes Online
Associate Professor Ong Seow Eng,
Dr Sing Tien Foo, Mr Ho Khee Kien
& Ms Pearlyn Ang
School of Design & Environment

Introduction

The Real Estate Development and Investment Game (REDIG) was originally conceived as part of a research project undertaken by the Department of Real Estate (School of Design and Environment) and has since evolved into a valuable teaching tool. The REDIG was first developed in 1998 for the undergraduate module EM2108 Real Estate Finance where students participate as developers and investors in a simulated environment/economic experiment. The objective of the REDIG is for students to appreciate the risk of property development and investment, and how return is commensurate with risk.

Risk is often taught as if it is a static concept. Typically, risk is quantified in terms of standard deviation or variance, and further appreciated in a Monte Carlo simulation analysis. However, no amount of statistical or simulation analysis can adequately communicate the concept of risk in real time; hence a simulated environment was needed for students to understand the meaning of risk.

Experimental Design

The basic experimental design is to structure the students into two cohorts: developers and investors. Developers acquire land, develop and sell the completed property units to investors. The objective of developers is to maximise profits. So do investors, who purchase and sell property units with the objective of reaping capital gains and income. Each game comprises several discrete time periods and students are evaluated over at the end of the game.
The main stochastic variable is property price. A prevailing property price is ascertained exogenously each period and announced to all participants at the start of the period. The prevailing property price reflects the price of property transacted in the secondary market and is not determined by the developers. Developer pricing is thus differentiated from the prevailing property price in that developers ascertain the prices of new properties while the prevailing price is market-determined. Needless to say, developer pricing must be guided by the prevailing price.

Relevance & Role of Games in Teaching

After the inaugural game in 1998, a follow-up survey was conducted with the participants of the REDIG to evaluate the relevance of the game in helping students appreciate certain concepts in property investment and development, and to elicit students’ perception on the usefulness of such a game in teaching.

Relevance of Game

Students were requested to rate the relevance of the game (10: very relevant; 1: no relevance) in respect of understanding:

  • Risk
  • Return
  • Role of Income
  • Role of Financing
  • Role of Capital Gains
  • Attitude towards Risk
  • Timing of Purchase/Sale
  • Pricing Strategy (for developers only).

Figure 1 shows the mean (simple average) rating. All categories show mean rating in excess of 6.5, and in fact, the mean rating exceeds 7 in 6 out of 8 categories.

Figure 2 shows the distribution of ratings by way of histograms. It is clear that the histograms are highly skewed to the right. In particular, students evaluate highly factors such as risk, pricing strategies and timing.

Role of Game in Teaching

Next, students were asked whether the extent to which they agree with statements pertaining to the relevance of the game in teaching (10: strong agreement; 1: strong disagreement). The statements are:

  • The game is a valuable teaching and learning tool in real estate development and investment.
  • The game complements and enhances the typical lecture/tutorial teaching format.
  • The game is a better medium in learning about risk than the typical lecture/tutorial format.
  • The game should be integrated as part of the real estate course.
  • I would like to participate in future games.

The mean scores from the survey are given in Figure 3 . Again, the mean ranking is close to or greater than 7.

Figure 4 shows the distribution of the raw scores . A large majority of the students agreed with the above statements and the distributions are again skewed to the right. Interestingly, the statements that the game is a valuable teaching and learning tool in real estate development and investment and that the game should be integrated as part of the real estate course received high ratings (agreement).

Concluding Remarks

The game has been conducted over the past three years, and student feedback has consistently been positive. One student put it adroitly thus:

“A learned man once said, ‘In chess, there are different pawns, and the movement of each type of pawns is governed by certain rules. These rules of movement are not difficult to learn—so simple that a child could memorize them within minutes. However, because of the manifold configurations made possible by these rules, the game becomes so complex and unpredictable even for grandmasters.’

Similarly, this game creates an appreciation of the complexity and unpredictability of real estate investment and development. In the DIG, where the rules are kept few, simple and fixed, there are several strategies one could deploy. In reality, there are more factors and pitfalls... the multitude of strategies available makes even the most brilliant perplex. This, we believe, captures the moral of the game.”

Since the REDIG innovation was featured in CDTLink (July 1999, Vol. 3, No. 2, p. 12), we are now pleased to announce that the REDIG will go online. The online version of the REDIG is developed jointly with the Centre for Information Technology and Applications, School of Design & Environment. The prototype version has been tested and the final version should be ready by mid-2001.

 

The motivation for introducing an online version is that students noted that the ability to purchase units from developers is constrained by their physical location in the lecture theatre in which the game is held. Since developers are usually situated in the front row of the lecture theatre, students further away may be disadvantaged relative to those who are nearer when units for purchase becomes available. The online REDIG will ensure that this physical constraint will no longer apply. Another motivation is that by going online, the game can be played virtually by any person, any time and any where in Singapore and in the world.



 

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The Real Estate Development & Investment Game Goes Online



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