Main Page => Notes & Assignment
REAL ESTATE
– Real estate is "property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more generally) buildings or housing in general
• In general real estate is defined as a land.
• The ownership of real estate carries certain rights, known as the bundle of rights.
• The bundle includes the right to use, posses, exclude and dispose. These rights are not absolute; they can be legally modified by private restrictions and government regulations and laws.
• In short, real estate or real property is land and improvements and the rights associated with the ownership of same
• Real estate economics is about people and how their actions affect real estate values.
• A formal definition would be; real estate economics is a study that uses economic principles, both macro and micro, to analyse the impact that national, regional, community and neighbourhood trends have on real estate values.
• Real estate economics focuses on the economic principles that affect real estate values.
LAND ( ECONOMY)
• In economics, land comprises all naturally occurring resources whose supply is inherently fixed.
• To planners, land is an intangible space on which development activities take place, contributing to its use and value.
• To farmers, it is the productivity of soil.
• To economists, it is a factor of production besides, labor and capital.
• Land is thus a social and physical entity.
• Real estate is the term defined as the land, including the air above it, ground below it, any buildings or structures on it, and any natural resources in it
INVESTMENT
• Investment is the giving up of a capital sum in the hope for a profitable return in the future whether in the form of rent, interest, dividend, bonus, increase in value and others.
• An investor would consider the security of capital and the return expected from the investment.
• Other qualities that would be considered are liquidity of capital, security of income from the aspect of stability in the purchasing power and the prospect of capital appreciation
PROPERTY MARKET
Definition: The buying, selling, and renting of land or buildings.
1. Durability
• Can be durable and build multi- generation wealth.
• There is no maturity in real estate investment. The longer the age of the property, the higher its value.
2. Lack of Transparency
• Investors have access to real-time market information, and area able to make immediate changes to their investments.
• In auction, be sure to take a higher risk into consideration when making an offer. The higher the risk, the higher the outcomes in real estate investments
3. Heterogeneity (no look-alike)
– Every property is being unique in terms of location, physical structure and financing.
– The geographic consultation must be considered in order to have a good investment in real estate.
4. Illiquid ( Not Easy to Sell)
– Refers to the state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value.
– Illiquid assets may also be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset
5. High Start-up Costs
– Typical costs are purchase/ closing costs, rehabbing and financing.
– it takes money to make money’, thus its limits the nos. of investors, add to stability and have a longterm appreciation.
6. Investment Vulnerability
– Real estate investment is not a static investment but it is requires constant changes as cities and economic changes
1. Prices are fixed by the government
2. Central Planning Authority takes all the decisions on production on behalf of the government.
3. The authority distributes the different goods among the consumers through ration shops or fair price shops.
4. The government fixes the prices of the different factors of production like wage rate and interest rate etc
CHARACTERISTIC OR FEATURES OF PRICE MECHANISM
Definition: In economics, a price mechanism is the manner in which the prices of goods or services affect the supply and demand of goods and services, principally by the price elasticity of demand.
A price mechanism affects both buyers and sellers who negotiate prices.
Real Estate Market is Differ Compared to Other
• Property market needs real estate experts such as agents and property consultants for sale and purchase transactions and giving professional advice to reduce imperfect knowledge.
• Property market is complex due to the different objectives and intentions of investors in different property transactions.
• The property market is unique and this would create some problems to the investor. With the exception of property unit trusts, property cannot be bought in smaller units. This is different from investment in stocks and shares.
