Real Estate Economy

Real estate economics is defined as the application of economic techniques to real estate markets. It explains, describe, and execute prices, supply, and demand of the market.

In real estate Researchers use paradigms and methodologies for finance and economics

Contents of the real estate market includes working and infrastructure , mortgages and asset security, risk management and valuation, public policy and regulation.

Overview

The are five main participants in the real estate markets they are as follows:

Owner/User - These people may act as owners as well as tenants. They will purchase houses or commercial property to live in or to use for their business purpose.

Owner - These people act as only investors. Their owned property will be provided as rent out or lease the property to someone else.

Renter - These people act only as consumers.

Developers - These people produce land for building that results in new product for the market. Renovators - These people supply refurbished buildings to the market.

Facilitators - This kind includes banks, Real Estate Brokers lawyers, and others that facilitate purchase and sales.

Characteristics
The unique characteristics of the real estate market include:

Durability



Real estate is said to be durable. Real estate markets are modeled as a stock/flow market because of its construction as it can last for decade of years or even centuries as in-destroyable. About 98% of supply consists of the stock of existing houses, while about 2% consists of the flow of new development.




Time delay



The market process subject to time delays as it takes long time to finance, design, and construct new supply, and also due to the relatively slow rate of change of demand. Because of these lags there is a great potential for disequilibrium in the short run.




Heterogeneous



Each and Every thing in Real estate is unique, in terms of location, building, and financing. This intern increases costs, and greatly restricts substitutability. The real estate market can be divided into residential, commercial, and industrial segments and subcategories such as recreational, income generating, area, historical/protected, etc.




Investment and consumption as good



Real estate can be purchased with an good investment, or with good consumption , or both. If this dual nature is good means that then have to invest more money in an asset than it is worth on the open market.




High Transaction costs



Costs include search costs, real estate fees, moving costs, legal fees, land transfer taxes, and deed registration fees.For the seller the transaction costs ranges from 1.5 - 6% of the purchase price. In Continental Europe for both buyer and seller,transaction cost can range between 15 - 20%.




Immobility



Real estate market is immobile Consumers come to the good rather than the good going to the consumer.Due to this, there is no physical market.