I am still a learner , but here is how I thought.
Quote:
(A) People today have more money, relatively speaking, to spend on real estate than they did in previous centuries.
(B) Homeowners will be willing to spend large sums on residential properties in traditionally industrial or commercial districts.
(C) Many urban waterfront lots are available for purchase.
(D) Many coastal cities are encouraging developers to rehabilitate the waterfront through tax incentives.
(E) Properties in interior residential districts in coastal cities are significantly more expensive than those along the waterfront.
Conclusion is A developer who wishes to make a large profit would be wise to buy urban waterfront lots and erect residential buildings on them.
Quote:
So developers need to be able to make a large profit.
A):
No, even people have more money , there is no evidence showed that people would like to use those money on real estate. For example they may want to invest to stocks.
More over, even they may want to invest to real estate , there is no evidence showed that those people would like to purchase water front real estate whose price tag is high.
B):
Yes: If buyers are ready to pay more money, developers will have high possibility to make a large profit.
C):
No: Even lands are available, it does not mean that developer can sell properties on those lands and make a large profit.
D):
No: Why government will give developers huge tax incentives if there are healthy supply and demand flow. In general, government will give tax incentive or they cannot bring people and/or company and/or jobs.
E):
No: This sounds me tricky, but even "Properties in interior residential districts in coastal cities are significantly more expensive than those along the waterfront." it does not mean that developer can make a large profit by developing and selling residential properties along the waterfront, for example , developers may not be able to make a profit for both cases.