Week 9 Marketability Flashcards
Define Market analysis
Process for examining the demand and supply of a property type and the geographic market area for that property type
Define marketability analysis
Process that investigates how a particular piece of property will be absorbed, sold, leased under current or anticipated market conditions (includes market analysis)
What are the 2 types of real estate markets analysed in valuation
User markets: Land Lord and tenant (or customers
Capital (buyer/seller) markets: debt and equity market
Difference between inferred analysis and fundamental analysis
Inferred- Demand projections on the basis of historical and current market conditions, rate of change and absorption patterns
Fundamental - Forecast demand based on both basic and economic factors and conditions affecting specific sectors and industries
Three approaches to value
Direct comparison - competitive properties, comparability, current market
Cost approach- current construction costs, market conditions
Income capitalisation - vacancy, absorption rates, market rent current and anticipated rate of return, competivness of the subject property
None of these methods can be applied without an appropriate market analysis
Valuer needs to define market in terms of:
Property characteristics Highest and best use Spatial delineation (geography)
Explain demand analysis
Demand analysis focuses on identifying the potential users for a property
The type of property will determine users type:
Retail properties are determined by demand for retail services by local consumers
Offices are determined by demand for businesses in local area
Residential properties are determined by demand for homes in the area
Important factors to consider when conducting market analysis residentially
Population (smaller families = more demand for smaller homes) Income Employment Percentage of owners v renters Financial (interest rates) Land use patterns Physical appeal (climate) Local tax system Support systems and community
Important factors to consider when conducting market analysis industrially
Presence of raw materials Exchange capabilities Labour avaliablity Land use patterns Accessibility Employment in industrial sector National and Eco growth Retail sales Goods flow by transport type (logistics) access to train highways
Explain supply analysis
Refers to the production and availability of real estate product
Need to check the inventory of properties that compete directly with the subject property
Stock of: (three types )
Existing units
Under construction
Projects in planing
Disequilibrium= supply and demand is out of balance
Three types of stocks (supply)
Existing units
Under construction
Projects in planning
Explain levels of market
Active market
Market with growing demand, lag in supply and increase in price
Depressed market
A market with drop in demand, oversupply and declining price
Buyers (sellers) market:
A depressed (active) market in which buyers (sellers) have the advantage
E.g. Many buyers vs few sellers
Many sellers vs few buyers
Explain the 6 step market analysis (pg140)
Define the product Market delineation Demand analysis Supply analysis Analysis the intersection of supply and demand Forecast subject capture
Types of analysis:
Economic base analysis:
Survey of industries and businesses that generate employment and income in a community as well as the change in demographic
- used to forecast future Eco activity
Market studies/ marketability studies:
A macroeconomic study that explores the general market conditions: supply/demand/pricing (market study)
An investigation of how a specific property can be absorbed in the market
Feasibility analysis:
An analysis undertaken to investigate if a project will generate enough revenue to cover all the expenses and profit to the investement
