Lecture 1 - Introduction To Real Estate Economics

7/14/2009
BPE 3393
ECONOMIC FOR REAL ESTATE
SEM 1, 2009/2010
LECTURE 1:
INTRODUCTION TO REAL
ESTATE ECONOMIC
By:
Masni binti Salleh
No. Bilik: B208-02
Tel: 07-453 8152 / 019-7205105
[email protected]
CONTENT
(a) What is real estate?

(b) What is real estate economics?
(c) Why study real estate economics?
(d) What is urban economics?
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7/14/2009
1.0 WHAT IS REAL ESTATE

The ownership of real estate
carries certain rights, known
Real estate is defined as a land as the bundle of rights -
includes the right to use,
possess, exclude and dispose
What is Real
Estate ?
The rights are not absolute - In short, real estate or real

they can be legally modified property is land and
by private restrictions and improvements and the rights
government regulations and associated with the ownership
laws of same
3
2.0 WHAT IS REAL ESTATE ECONOMICS

• Real estate economics is about people and how their actions
affect real estate values.
• A formal definition - real estate economics is a study that uses

economic principles, both macro and micro, to analyze the
impact that national, regional, community and neighborhood
trends have on real estate values.
• Focuses on the economic principles that affect real estate

values.
• Real estate economics is neither the study of general

economics nor a course in the practice of real estate.
• Rather, real estate economics is the link between general

economic theory and applied real estate practice. 4
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• A course in general economics concentrates on how society

attempts to use limited resources to satisfy the wants of its
people. However, such course does not examine how this,
affects local real estate market.
• A course in real estate practice concentrates on the specific

techniques needed to complete a real estate transaction but
spends little time discussing the economic influences that
determine whether a home purchase or other real estate
investment will be profitable over the years.
• Real estate economics draws principles from both general

economics and real estate practice and then combines them
in order to study changes in real estate activity.
5
• The main thrust of real estate economics is to help real estate

students anticipate future trends and what impact these
trends will have on local real estate values.
• Refer to Figure 1 and Figure 2.
• Figure 1: The field of real estate economics draws principles

from both general economics and real estate practice.
General Economics REAL ESTATE Real Estate

Principles Principles
ECONOMICS
and Theory and Practice
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• Figure 2: House of real estate economic
3.0 WHY STUDY REAL ESTATE

ECONOMICS
• Real estate economics help people to understand what causes
fluctuation in real estate activity and how these changes can
affect local real estate markets.
• Investors and licensed agents make real estate decisions that

influence the shape, form and value of property in a given
community.
• Real estate decisions made today will be reflected in real

estate values in the cities and neighborhoods of tomorrow.
• A course in real estate economics aids people in

understanding what impact today’s real estate actions will
have on future real estate values.
8
4
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4.0 WHAT IS URBAN ECONOMICS

• The descipline of urban economics is defined by the
intersection of geography and economics.
• Economics explores the choices people make when resources

are limited.
• Households make choices to maximize their utility, while firm

maximized their profit.
• Urban economics puts economics and geography together,

exploring the geographical or location choices of utility-
maximizing households and profit-maximizing firms.
• Urban economics also identifies inefficiencies in location

choices and examines alternatives public policies to promote
efficient choices. 9
Arthur O’Sullivan (2007) believes urban economics is divided into

six related indicators:
3. Urban 4. Urban crime

transportation and public
policy
2. Land use 5. Housing and

within cities public policy
1. Market 6. Local
forces in the government
development expenditures
of cities and taxes
10
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1) Market forces in the development of cities

The interurban location decisions of firms and households
generate cities of different size and economic structure.
2) Land use within cities

The intraurban location decisions of firms and households
generate urban land-use patterns.
3) Urban transportation
Possible solutions to the urban congestion problem and
look at the role of alternative urban transportations
problem.
11
4. Urban crime and public policy

Problem of urban crime are linked with two other urban
issues, poverty and low educational achievement.
5. Housing and public policy

Housing choices are linked to location choices because
housing is immobile.
6. Local government expenditures and taxes

In making location choices, households consider the mix of
taxes and local public goods.
12
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Class Activity
Real estate studies at universities are
biased towards urban problem.
Argue !
13
THANK YOU July, 2009
14

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7/14/2009

(a) What is real estate?

1.0 WHAT IS REAL ESTATE

The rights are not absolute - In short, real estate or real

2.0 WHAT IS REAL ESTATE ECONOMICS

• A formal definition - real estate economics is a study that uses

• Focuses on the economic principles that affect real estate

• Real estate economics is neither the study of general

• Rather, real estate economics is the link between general

• A course in general economics concentrates on how society

• A course in real estate practice concentrates on the specific

• Real estate economics draws principles from both general

• The main thrust of real estate economics is to help real estate

• Refer to Figure 1 and Figure 2.

• Figure 1: The field of real estate economics draws principles

General Economics REAL ESTATE Real Estate

• Figure 2: House of real estate economic

3.0 WHY STUDY REAL ESTATE

• Investors and licensed agents make real estate decisions that

• Real estate decisions made today will be reflected in real

• A course in real estate economics aids people in

4.0 WHAT IS URBAN ECONOMICS

• Economics explores the choices people make when resources

• Households make choices to maximize their utility, while firm

• Urban economics puts economics and geography together,

• Urban economics also identifies inefficiencies in location

Arthur O’Sullivan (2007) believes urban economics is divided into

3. Urban 4. Urban crime

2. Land use 5. Housing and

1) Market forces in the development of cities

2) Land use within cities

4. Urban crime and public policy

5. Housing and public policy

6. Local government expenditures and taxes

THANK YOU July, 2009

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