URP 3161
Housing and Real Estate Development
Characteristics of Real Estate Market
Presented by:
Showmitra Kumar Sarkar
Lecturer
Department of Urban and Regional Planning
Khulna University of Engineering & Technology (KUET)
Khulna-9203, Bangladesh
Acknowledgement...
These slides are aggregations for better understanding of the topic mentioned in the
previous slide . I acknowledge the contribution of all the authors and photographers
from where I tried to accumulate the info and used for better presentation.
Real Estate Participants
Real estate values derive from the interaction of
3 different sectors in the economy...
Government
Affects the supply and cost of
real estate in different ways.
Financial World or Capital Market
The capital market serve to allocate Real World or User Market
financial resources among households Characterized by competition among users
and firms requiring funds. for physical location and space.
Capital Market
Participants in capial markets invest in stocks, bonds, mutual funds, private business
enterprises, mortgage contracts and other opportunities with the expectation of
receiving a financial return on their investment.
Private Markets Public Markets
Components Components
Equity/Owners Individuals, firms, and Investors in publicly
Interests institutions traded real estate
companies
Debt/Lenders Banks, Insurance Investors in mortgage-
Interests companies, private backed securities
lenders
Government
Affects the supply, cost and quality of real estate through…
Zoning Codes, Land Use Provision of roads, bridges, mass
Regulations, Fees on New Land transit, utilities, flood control, schools,
Development and Building Codes that social services, and other infrastructure
restrict methods of construction of the community
Income Tax Policy Housing Subsidy Environmental Laws
Interaction of Value Determining Sectors
Characteristics of Real Estate Market
Real estate markets are unique when compared to other goods
Heterogeneity Immobility
Due to these two factors the buying, selling and leasing of real estate tends to be
localized and highly segmented, with privately negotiated transactions and high
transaction costs.
Heterogeneous Product
❑ Real estate tends to be heterogeneous, meaning that each property has unique
features and can be distinguished from one another.
❑ For real estate, however, age, building design, and especially location combine to give
each property distinctive characteristics.
❑ Even in residential neighborhoods with very similar houses, the locations differ.
❑ Corner lots have different locational features than interior lots; their access to parks
and transportation routes may differ, and the traffic patterns within the neighborhood
create differences.
Immobile Products
❑ Real estate is immobile. Although it is sometimes physically possible to move a
building from one location to another, this is generally not financially feasible. The
vast majority of structures removed from the land are demolished rather than moved.
❑ Another term for location is access. For households it is access to school, shopping,
entertainment, and places of employment. For commercial properties it may be
access to customers, the labor force, or suppliers. The nuances of access are
fundamental to real estate value.
Localized Market
❑ Real estate markets tend to be localized.
❑ By this we mean that the potential users of a property, and competing sites, generally
lie within a short distance of each other.
❑ For example, competing apartment properties may lie within 15 minutes, or less, in
driving time from each other, while competing properties of single-family residences
may tend to be within a single elementary school district or even within a small
number of similar subdivisions.
❑ Clearly, the market for a neighborhood shopping center is very localized. Such centers
usually draw the majority of their customers from within a five-mile radius, or less.
Segmented Market
❑ Real estate markets tend to be highly segmented due to the heterogeneous nature of the
products. Households that search for single-family detached units in the market will generally
not consider other residential product types such as an attached townhouse unit or
condominium.
❑ In addition, real estate is segmented by product price. The same holds true, although to a
lesser extent, in the commercial property market. Commercial property markets are
segmented by both users and investors. Larger, more valuable commercial properties,
generally well over $10 million, are often referred to as investment-grade properties, or
institutional-grade real estate.
❑ The localized nature of real estate markets also contributes to segmentation and explains why
rents and prices for otherwise similar property can vary significantly across metropolitan
markets and even submarkets within a given metropolitan area.
Questions
?
