The Market and Public Policy Dimension
Economics is concerned with choices that are necessary due to the scarcity of resources
Who makes the choices? they are made by free individuals (the market) or they are made on our behalf by the state (government intervention)
every economy in each country will have a varying degree of each creating a mixed economy.
there are many submarkets which include Space, investment, land, office, housing, development, retail, industrial, leisure.
They are traded either as a bundle of rights or as final use
supply of real estate comes from turnover of existing stock, conversion from other categories and new build.
The turnover of existing stock dominates supply and is not sensitive to price, profit, or public policy signals.
Therefore due to this inelasticity of supply, values in this sector are primarily driven by demand. i.e. when demand rises, rents and capital values rise; supply responses are usually too weak to bring prices back down again.
efficiency and equity, the two fundamental evaluative criteria in economics
to what extent does something maximise economic WELFARE?
what extent does it encourage a fair distribution of that WELFARE?
public economic policy should be guided by this, but then governments sometimes stick to their own agenda especially close to election.
Public policy is Pervasive within the sector; governments have housing policies, strategic land planning policy, development control, infrastructure, conservation etc. in addition they issue building regs, hand out grants, impose taxes, provide market information.
these initiatives come from local, national, EU bodies
The Temporal Dimension
Building are significantly durable
property transactions have costs and benefits that stretch into the future; waiting for money carries penalties i.e. interest foregone, real value errosion and carries risk.
Economic values relating to property and construction fluctuate cyclically
The Spatial Dimension
Location, location, location
Function of the real property market
Allocates existing real property resouces…