Real Estate Land and the Importance in the Market

Real estate is permanent. Buildings can last for centuries and land is indestructible. Real estate is often called realty as it is considered real property. Common law terms it as real estate while under civil law it is considered immovable property. The growth in private ownership of property has made real estate a major business. Today investment in real estate gives the best of returns.

Speculative market

The real estate market, especially the housing segment, often sees high levels of speculative activities which shoot up the prices beyond reach. Housing bubbles are caused by increased valuation of real property, resulting in unsustainable levels of pricing in relation to income. Such bubbles are generally followed by decrease in prices leading to cases of negative equity. However, real estate crash is different from stock market crash in that prices do not fall but remain constant over a number of years.

The housing bubble in the US was a reaction to the 2001-2002 recession. People took advantage of the refinancing boom to avail of lower interests and take advantage of rising property price to increase equity of their homes.

Pricing of real estate land

Pricing of real estate is unique in terms of its location, its buildings and financing. Median and mean are two major ways of arriving at real estate prices. Median price is determined by dividing the market into two halves – the highest and lowest priced. Mean price is the average of prices for all property sold in an area. Square foot prices are also adopted in real estate in which the median or mean price is divided by the home’s square foot.

Real estate prices are driven by macro and micro forces. The former relates to the economic forces while the latter is influence by local factors.

Real estate broker

Real estate brokers assist in the marketing of property and act as intermediary between buyers and sellers in an endeavor to finalize a deal based on the most agreeable mutual terms. In the US brokers are required to have licence to make them eligible for remuneration. However, in some states lawyers are allowed to act as brokers without the need for licence.

Appraisal

Appraisal of real estate is carried out by a licenced appraiser for opinion of value which are defined as market value, condemnation value, quick sale value etc. In th UK such appraisal is called property valuation and an appraiser is called land or property valuer.

Investment in real estate

Real estate is a great investment area. In most countries of the world a significant portion of the total wealth is in the form of land. In most advanced countries land is used as mortgage by individuals and enterprises to raise capital. Real estate is also a favourite among banks as security for loans.