Sensitivity Analysis in Property Development: Why Your Single-Number Feasibility Is Wrong
The Problem With Single-Number Feasibility
Most property development feasibility studies present a single set of numbers: one GDV, one total cost, one profit margin. This creates an illusion of certainty that doesn't exist.
Every input in your feasibility study is actually an estimate:
- Construction costs? Estimate (subject to builder variance, material escalation, ground conditions)
- Expected selling prices? Estimate (based on past sales, future market conditions unknown)
- Programme duration? Estimate (affected by weather, subcontractor availability, council delays)
- Finance costs? Estimate (interest rates fluctuate, drawdown timing varies)
When you present a single outcome from these moving parts, you're not being precise — you're being misleading.
What Sensitivity Analysis Actually Does
Sensitivity analysis answers the question: "If my costs go up by X%, what happens to my profit?"
One-Way Sensitivity
Tests the impact of changing ONE variable while holding all others constant:
Base case: 18% margin
- Construction +5%: margin drops to 14.5%
- Construction +10%: margin drops to 11%
- Construction +15%: margin drops to 7.5%
- Construction +20%: margin drops to 4%
GDV −5%: margin drops to 12.5% GDV −10%: margin drops to 7% GDV −15%: margin drops to 1.5%
Two-Way Sensitivity (The Real Test)
Combines two variables simultaneously — because in reality, costs and selling prices rarely move independently:
| Construction / GDV | Base GDV | GDV −5% | GDV −10% |
|---|---|---|---|
| Base cost | 18.0% | 12.5% | 7.0% |
| Cost +5% | 14.5% | 9.0% | 3.5% |
| Cost +10% | 11.0% | 5.5% | 0.0% |
| Cost +15% | 7.5% | 2.0% | (3.5%) |
This matrix reveals something a single number never could: your project breaks even if costs rise 10% AND values drop 10%. That's the actual risk profile.
Real-World Example: The Developer Who Nearly Lost Everything
A Melbourne townhouse developer in 2022 modelled a 16-unit scheme with an 18% margin. The feasibility looked solid. No sensitivity analysis was run.
What happened:
- Bricklaying labour shortage: construction +12%
- Interest rate rises: finance costs +40%
- Market softening: GDV fell 5%
The combined effect reduced the actual margin from 18% to 3.8%. The project technically "made money" but at a fraction of the expected return. And that was before considering the developer's time and opportunity cost.
With proper sensitivity analysis, that developer would have seen that any combination of cost increases above 8% OR value decreases above 7% would destroy the margin. They could have walked away, or restructured the deal with a lower land price.
What Levels of Sensitivity You Should Test
| Scenario | Construction | GDV | Programme |
|---|---|---|---|
| Base case | Current estimate | Conservative comparables | Standard programme |
| Mild stress | +5% | −3% | +3 months |
| Moderate stress | +10% | −7% | +6 months |
| Severe stress | +15% | −10% | +9 months |
| Catastrophic | +20% | −15% | +12 months |
A development that still shows a positive margin under moderate stress is a solid project. A project that goes negative under mild stress? Walk away.
Automating Sensitivity in FEEZO
FEEZO automatically generates:
- One-way sensitivity tables for construction cost, GDV, and programme changes
- Two-way (dual-variable) sensitivity matrices showing combined effects
- Break-even analysis — exactly where your margin goes to zero
- Colour-coded risk heatmaps — green (safe), amber (caution), red (dangerous)
All calculated in under 10 milliseconds. Change any input and the entire sensitivity table updates instantly.