|
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.
|
