competition requires as well as the above, that buyers and sellers
possess complete knowledge of the market.
REAL ESTATE MARKET IS NOT PERFECT OR PURE COMPETITION
estate markets differ from perfect and pure competitive markets in a
number of ways:
OR LITTLE HOMOGENEITY
the real estate market, each parcel is unique and each building/land
parcel is different.
in a newly developed subdivision may be good but not perfect
substitutes for each other. Many parcels of industrial or commercial
property are poor substitutes for each other.
NUMBERS OF BUYERS AND SELLERS
real estate markets have only a few sellers and buyers in a
particular market at any point of time.
some rural districts, the only possible purchaser is to an adjoining
or immediate owner.
ON THE REAL ESTATE MARKET
estate markets are affected by a variety of state, federal and local
government rules, standards and regulations.
Government policy can determine interest rates and the income tax
rate. This aspect is shown by the effect of negative gearing on the
value of suitable residential investment property.
governments' acts, rules, standards and regulations on subdivision
and fire prevention and control. Such controls can create uncertainty
for example, the possible release of fringe area or green belt
(greenfields) land for residential use in the near future.
estate is immobile as it cannot move to a place where it would fetch
the best price. This factor can cause economic obsolescence of
improvements for example, when a change in zone causes building
demand for real property is generally affected by events in the
neighbourhood such as employment, social factors although the
property itself has not changed they have caused under or over
capitalization of the improvements.
and sellers of real estate are often poorly informed. They buy or
sell infrequently and are not familiar with the marketing process for
example, auction procedures. However, this problem is mitigated by
the factors outlined in previous parts particularly, the role of the
agent acting as an informed middleman.
not a perfect or pure market, the real estate market is competitive
so that the forces of competition are important in determining price.
Parcels of real estate although not identical, are often reasonable
substitutes and commonly, localities or suburbs can be substituted
for each other. Buyers of commercial and industrial real estate may
not be bound to one location and real estate developers and builders
may move from market to market in response to profit opportunities.