Real estate has several unique characteristics that affect its value. There are economic characteristics and physical characteristics. Real estate is a product that is bought but differs from everything else due to the characteristics that will be discussed here.
The economic characteristics that influence the value are scarcity, improvements, permanence and area preference. The scarcity is demonstrated simply by the saying: “They are no longer producing.” The supply of land has a ceiling and cannot be produced more than what exists today. However, this value of this supply is influenced by other characteristics.
Improvements, such as buildings on a parcel of land, can affect the value of neighboring parcels or the entire community. If a large company builds in a certain depressed neighborhood, the value of living there will likely increase due to the introduction of jobs. This value would impact neighboring communities, thus increasing the value of real estate in these areas in some way.
Permanence has to do with infrastructure. As buildings, houses, or other structures are demolished, infrastructure, such as sewer, sewer, electricity, and water, remains intact. Effects of real estate permanence, or the type of infrastructure. If you buy land in an area without utilities, drainage, or paved streets, it will most likely be worth less than land that has this infrastructure intact and developed.
Area preference refers to the choices of people in a given area. Most people refer to this when they talk about real estate as “location, location, location.” The location of a preferred area, for whatever reasons, is what makes home values higher. On the contrary, the location of a non-preferred area, for whatever reason, is what makes the value of homes lower. New 8,000-square-foot homes on the shoreline of Long Island, East Hampton will be worth much more due to your area preference, over an area of 1,200-square-foot start-up homes in central Long Island, located next to a landfill landfill. garbage.
The physical characteristics of the earth represent its indestructible nature, immobility and inhomogeneity. Working backwards, we will start with inhomogeneity. This simply indicates that no two parcels are the same. Two parcels of land can be very similar, but each parcel is different geographically because each parcel is located in a different location. This includes two batches side by side. It is important to remember that parcels are created by subdivision of land, so as a large 20 acre parcel is subdivided, each individual lot becomes its own separate lot.
The earth cannot move, therefore it is immobile. Even when the ground is pulled from the ground, the part of the Earth’s surface will always remain. It is important to note here how this physical characteristic affects legislation and real estate markets. Land immobility is the reason why property laws and markets are local in nature.
The indestructibility of the earth simply means that it is durable and cannot be destroyed. It can be damaged by storms and other disasters, but it remains and endures the changing times and will always be there. This is one of the main reasons why land is referred to as a good investment.
So the basic characteristics of real estate include scarcity, land improvements, permanence, area preference, inhomogeneity, indestructibility, and immobility. Keep in mind that there is a big difference between land and real estate. The land is the part of the earth’s surface, the subsoil and the air above it. Real estate is anything that sticks to the ground. So when looking for investments, it is important to consider the infrastructure of the area, the surrounding neighborhood, and the preferences of the area or … location, location, location!