Property Market Economics

Property Market Economics

Outline:

1) Definition of the property market: the property market comprises of the real estate market that deals with buying, selling and renting of land and buildings

2) Supply and demand in the property market

i) Historical trends in the property market with reference to supply and demand

(a) Supply in the property market has bee relatively low in the past few years resulting into a higher equilibrium price

(b) Demand has increased over the past few years due to population growth and this has exceeded supply resulting into higher equilibrium prices

ii) Future trends- refers to expectations about the supply and demand in the future

(a) Supply is expected to increase as more investors are encouraged to invest more in the property market

Property Market Economics

(b)  Demand is expected to increase due to increase in population size.

3) Market segments and market structure:

i) Segments: refers to existing segments in the property market such as division in the market with reference to type of products

ii) Market structure: the property market is unique although it assumes a competitive market structure

iii) Firm cost curves: firms in the industry face high capital costs but relatively low operating

costs

iv) Prices: prices in the property market are determined by supply and demand but are affected by other forces in the economy resulting into a market bubble

4) Factors affecting the property market:

i) Interest rates: – high interest rates will lead to a decline in the level of investment which is due to higher costs of capital.

ii) Market bubbles: an increase in property price that is not associated with economic variables

Property Market Economics