QSM656 URBAN LAND USE

AND VALUE
CONSTRUCTION ECONOMICS III
BRAIN TEASER
Why is it when we go
up, it is colder, should it
be hotter since we are
nearer to the sun?
WHAT IS LAND?
WHY PEOPLE FOUGHT FOR LAND?
WHY WE NEED LAND?

You can read more here if you are interested -> http://www.landcoalition.org/en/why-land/what-we-do
NATIONAL LAND CODE
British Colony (Wikipedia, 2017)
LAND IS SOMETHING THAT IS…
Free gift of nature
Used to yield an income
Combined with other factors – can earn revenue
Unique factor of production
Fixed in supply
CHARACTERISTICS OF LAND

The relative fixity of supply

 Total supply of land is fixed – if increase, it will be at
the expense of another, e.g. increase in agriculture land,
will reduce the forest.
 Land use can be increased by more intensive use –
constructing multi-storey building on a small land
 But compare to capital and labour, land is least flexible
CHARACTERISTICS OF LAND
No cost of creation
Man cannot create land, it is naturally existed
No cost of creation, but when land is developed, cost are incurred
 WAYS TO INCREASE SUPPLY OF LAND
Land clearance
 Fastest and easiest way
 Demolishing old buildings @ clearing forest
 Negative impact – animal habitat and plants destroyed; global warming
Land reclamation
 Create dry land from swamp, lake or sea
 Using landfill and/or empoldering method
 Expensive especially in deep waters
 Must consider neighbour’s territories
 Negative impact – coastal habitat, marine life destroyed
 CHARACTERISTICS OF LAND
Heterogeneity (diverse in character/content)
 Each site and building is different
 Land can be classified into a number of economic categories
 Sub-marginal land having no remuneration use
- The land incapable of growing crops maybe due to pollution, lack of water
supply, poor soil quality etc
- Economically not viable for development
- Less than idle land
 Break-even marginal land
- Capable of growing crops but lack of profit
 Profit or surplus yielding infra-marginal land
- Profitable land
- Agriculture > residential > commercial
CHARACTERISTICS OF LAND
The law of diminishing returns
•Land is subject to law of diminishing returns
•In economics, diminishing returns is the decrease in the marginal
(incremental) output of a production process as the amount of a
single factor of production is incrementally increased, while the
amounts of all other factors of production stay constant.
•David Ricardo – The law states that “after successive applications
of labour and capital to a given area of land, first the marginal
output, then the average output and eventually the total output
diminishes”
No of Total rent Average Marginal
storey income rent rent

Urban Land Economics and Public Policy

By Paul N. Balchin, Jeffrey L. Kieve, Gregory H. Bull
CHARACTERISTICS OF LAND
The absence of a market for land
Land transaction are not in land itself but in the interest or right in,
on, under, and over land.
The grant or land title is given as the prove of the ownership/right
of the land
 CHARACTERISTICS OF LAND
Economic or scarcity rent
Ricardo stated that: Rent = differential surplus in the sense that a more fertile or super
marginal land earns a surplus of revenue over its costs.
Rent in this case is not to be confused with the payment for temporary use of property
In Ricardian theory, rent is due to differences in fertility and situation. While in modern
theory it is due to scarcity or specificity
In Ricardian theory, production of land is the important basis of determination of rent
while in modern theory power of demand and supply plays an important role.
Economic rent is an excess payment made for the land ownership transfer over the
amount required (transfer earning) by the property owner to proceed with the deal.
As economic rent arises from conditions of scarcity, the concept can be used to
demonstrate numerous pricing discrepancies. These include higher pay for unionized
workers compared to non-unionized workers, or huge salaries made by a star athlete or
sportsperson versus an average individual. http://www.economicsdiscussion.net/difference-between/difference-between-differential-rent-and-scarcity-rent-rent/13911
http://www.investopedia.com/terms/e/economicrent.asp#ixzz4cXeBjOUx
 WHAT IS LAND ECONOMICS
Economics can be defined as a study of how man adapts the resources of the world to satisfy
his wants
Focusing on the best use of land as land itself is a limited/fixed resources
The application of economic theories to the problem related to the use of land and explaining
the causes and consequences of human action
The study of how labour and capital are used with land to produce goods and services
Land economics involve labour economics, public finance and every possible field of economic
study
Land use can have a profound impact on local economic e.g. rural or urban. One of main focus
is the allocation of land
Since land is fixed resources, the value is dictated by its availability, the more scarce – more
expensive
FACTORS INFLUENCING LAND VALUE
Business owners locate their activities where they can maximize profits.
Property developers develop areas which has the highest potential of
demand.
There are various factors that influence the land value, among others are:
General accessibility
Special accessibility – agglomeration economies
Other influences on land use
Institutional factors
Other factors
GENERAL ACCESSIBILITY
The advantage of a particular location in term of
 The movement costs it avoids – includes time save
 The revenue-earning capacity
 Convenience it affords
Profitability due to the ease of accessibility
Firms require accessibility to markets and to factors of production (particularly
labour), will deliberately choose locations that are close to all sources of production
and market which located inside central business district (CBD)
Household require accesibility to work opportunity, shops, schools and recreational
facilities. Since household has lower ability to pay higher rent, they will usually reside
outside CBD
Since there are limited space in CBD, the rents will be higher, thus businesses can
outbid the household
 SPECIAL ACCESSIBILITY – AGGLOMERATION
ECONOMIES (LOCATED NEAR EACH OTHER)
Resulting from the external economic of concentration (relationship of population and good
infrastructure) and complimentary (enhance residential attraction of certain area)
Refers to the impact of proximity of similar activities
 Ready supply of trained labours e.g. medical doctors/engineers/skill workers

Advantages of shops locating near to each other

 Tapping each other’s market
 Offering choice to customers
 Enhancing the attractiveness of shopping trip

Advantages of offices of being close together

 Labour supply and availability of common service (e.g. lawyer’s office nearby property agent)
 Enable to exchange expertise

This is called agglomeration economies

 AGGLOMERATION ECONOMIES
Within general pattern of urban land use, there is ‘clustering’ of shops specializing in
particular activities on adjacent sites”
These economies are composed primarily of what economies call ‘externalities’ or ‘external
exclusively’.
External economies refer to the response of one firm output to the activities of others
Such as Indian Jewellery (Lebuh Ampang), Chinese Antiques (Petaling Street), ladies fashion
(Jalan TAR)
Similarly, manufacturing or service firms may cluster together
While, household may favour locations close to other people with similar taste, social
background, etc.
However there is a problem due to economic concentration such as traffic congestion which
may exercise repellant effect and eventually reduce the general accessibility of a locality
http://www.freemalaysiatoday.com/category/nation/2
017/03/17/businesses-moving-out-of-kl/
 OTHER INFLUENCES ON LAND USE
The growth in the size of that area
 Only large urban areas is possible to support certain activities, and many
companies will seek central site. A company may be able to recruit sufficient
highly specialist labour in large town
Imperfections of the capital market
 This may in practice prevent preferences being fully expressed in the market,
thus, the willingness of institutions/companies to fund office project has weight
city center in this direction
Improvement of building techniques
Transport developments
 INSTITUTIONAL FACTORS
Institutional factors are rules, policies, norms, and routines, that
guide behaviour, not just inside an organization.
Normally, government has the significant role. It includes:
Provide public goods (transportation, infrastructures)
Government policies
Secure external benefits (related to special accessibility)
Avoid external cost in development – e.g. extra cost to developed on
swamp/mining/polluted area; extra cost to develop area that need new
road for accessibility, etc
OTHER FACTORS
Supply and demand
Permitted use
Location
Physical characteristics
Availability of public services
Form of title
General nature of surrounding development and weather
compatible
 http://planningtank.com/urban-economics/factors-affecting-land-value

OTHER FACTORS
1. Physical attributes: These include quality of location, topography, climate, availability of water, sewer lines, etc. More and better facilities is
attributed to a higher price of land. Topography further has a direct effect on the construction cost and thus the overall development cost. The
facilities thus developed on an uneven land will have a much higher cost as compared to the flat plain.
2. Accessibility to economic activities: The more easily there is accessibility to economic activity, the more is the value of the land. For example,
most of the metropolitan cities have the maximum land values at the center, or at the central business district of the city. This is because of the
nearness to the economic activities and work place. This factor affecting land value is the sole most important factor which led to the development
of various land price models in urban economics.
3. Neighborhood amenities: The value of land is also affected by the availability of the facilities such as shopping areas, medical facilities,
school, parks& playgrounds, and other basic need of the humans. This helps in saving time of people every day, the time saved adds up the cost
of land. Also the reduced travel and reduced trip distance will directly have the monetary benefits of the person residing in an area with number
of such facilities in proximity.
4. Present and future land use: The value of the land is also determined by the land use permitted in the land premises. For example, if we
compare the values of two lands of same prices and same location but the land use permitted in the lands are different, one is commercial and
one is residential. In such case the value of the land with the land use which has more rate of return over a period of time will be valued more.
People are willing to pay a higher amount for a commercial land, in some cases industrial or institutional land use might attract even higher prices.
5. Demand and Supply Function: With the major demographic changes in the cities with time, the need for land also increases with the same
factor, with the increase in population there is increase in economic and other activities. This directly increases the demand in the of the land
components. Anticipation of high yields may also induce false scarcity of land; hence the location advantages of the properties at any time within
the urban boundaries and hence causes economic values of land to be increased. For any site there are certain points of transition in use, closely
related to the infrastructure and services, where jump in property value are likely to happen.
6. Location and Transport Linkages: The property located in the area of high level of infrastructure facilities or the one located in or adjacent to
the area of economical intensive activities such as markets or industries have higher values. Transport linkages are also important since they govern
the mobility & ease of movement to and from the area. Clearly defined hierarchy of roads, efficient public transportation and lack of congestion
are some of the desired transportation attribute of any area. Residential land values are also observed to be in direct proportion to the
hierarchical order of the adjacent road.
KOTA SAMARAHAN 1987 - 2017
1987
1992
1997
2002
2007
2012
2016
KUCHING IN 1984 & 2016
SHAH ALAM IN 1984 & 2016
KLIA IN 1984, 1998 & 2016
DISCUSSION
Discuss in a group the following issues and new development and its impact on land value
1. Native customary rights land in Sarawak - Yus
2. Malay reserve land in Peninsular Malaysia
3. Conversion of ex-mining land/lake to new development - Azie
4. Impact of heavy industries to land value (e.g. Lynas refinery in Kuantan, industrial park in
Penang/Demak) - Liyana
5. Impact of natural disaster to land value (e.g. flood in Kelantan)
6. Development of Kampung Baru in Kuala Lumpur - Ayuni
7. Development of Iskandar Malaysia in Johor - Rahman
8. Development of Putrajaya - Hamdan
 LAND USE DECISIONS &
DETERMINATION ON PRICE
 Rural

Urban
INTRODUCTION
In theory, all lands in Peninsular are domain of the Sultans, whose
subjects has the usufructiary rights of cultivation and occupancy of land
(Voon, 1978).
Individual land ownership was introduced by the British in the 19th
century. The land administration is modelled from the Torrens system in
Australia, which uses land registration system.
Malaysia has the total land area of 330,434km2 with 85% of
population occupies in the West Malaysia (Othman, 1992)
Overall, only 1/3 of total land area is utilized by agriculture,
residential, and other commercial activities.
In East Malaysia, it is under utilized due to the inaccessibility factor
RURAL
Mostly determined by the government as they are mostly agricultural
lands
For example – in determine the type of crops e.g. paddy, palm oil,
rubber
Straight forward
URBAN
Composition of urban land use
1. Nature of land use – relates to which activities are taking place
2. Level of spatial accumulation – indicates their intensity and
concentration
Urban land uses are mainly decided by
1. Firms
 Occupying main areas
 some firms will place greater importance upon location than others
 Loss in higher rent can be compensated with higher revenue
 On occasions will decide whether to expand, move or to developed the existing site
 Usually firms has to trade off rent against accessibility to maximize profit
 In the labour intensive firms, proximity to CBD would be crucial
 Land intensive firms (manufacturing, warehouse) locate further from the city center.
URBAN
Urban land uses are mainly decided by
2. Households
 Decide where to live - Depend on the vicinity of certain locations
 Travel time and cost related to the distance to workplace. Decision
trade off transport to CBD against extra space in the suburbs.
 Near CBD accessibility & rent high but restriction of space - squatters
 Non-monetary consideration such as space, fresh air, good school,
good neighbourhood
 Suburbs – high in space, lower rents but high transportation cost
 Affect the character to urban land use
 As income increased, people willing to spend more of their income on
transport to obtain space. Lower income household are located near
CBD, where they occupy space intensively at high rent per m2
URBAN
Urban land uses are mainly decided by
3. Government
 Control of development
 In Malaysia, under Federal Constituition, Town and Country planning
is implemented between Federal, State and Local Government
 Overall transport policy
 Public transport – buses, komuter, LRT, MRT etc
 Car ownership – preferred in low density area where public transport
is unavailable
 Sitting of roads, etc
 Federal & state roads
 Highways – location of the interchange, closed-toll system, open-toll
system (flat rate)
 LAND USE APPROACH
Assume a market economy, where:
1. Resources are allocated on the basis of prices, costs and profits
2. Firms and households have preferences for settling in particular locations
and these preferences are reflected in the price/rent they are prepared to
pay for the use of the land
3. Owners of land sell/let to the highest bidder
4. Knowledge of the market by buyers and sellers is sufficient to provide
competition
5. There are no dynamic changes, the transport system, transport costs,
technology, etc, remaining unchanged
6. There is no government interference in the market
CHANGES OF LAND USE
Land use can be change over time due to changes in government policy and the
market force. The following are examples of changes in land use in Klang Valley,
Malaysia in the Location, Timing & Branding 2.0 Book (Ho, 2016).
1. From Malay School to DBKL, Menara Tun Razak
2. From Malay burial ground to Court premises & Masjid Jamek
3. From Original Victoria Instituition to Traffic Police Station
4. From Museum to Sek. Ren. Keb. St John
5. From Courts to Menara Maybank
6. From Turn Club to KLCC
CHANGES OF LAND USE
Recent land use change over time, also from (Ho, 2016).
1. From Sg Buloh Rubber Research to Kwasa Damansara Township
2. From Car park for Stadium Merdeka and Stadium Negara to Warisan Merdeka
3. From Gov quarters to IKEA Cheras and others
4. From Gov quarters to TRX project by 1MDB
5. From Sg Besi Military Airport to Bandar Malaysia
6. From Oxidation pond off MRR2 to Axis Atrium and Pandan mixed development
7. From Pudu jail to Bukit Bintang City Centre Project
8. From Rubber/palm oil estate to residential estates
DETERMINATION OF THE PRICE OF LAND
Principle of supply and demand
 High demand (DD), low supply (SS) – high price
 Low demand, high supply – low price

Supply of land is fixed – price of land is wholly determine by demand alone

Supply in general may be fixed but the demand of land for a particular use is likely
to be more variable
Within urban area – there is competition between various sectors/users of land for the
limited available area
 Whoever pay higher price/rent will win the bidding

Land is shown as fixed in supply, therefore rent based on existing level of demand
 ECONOMIC RENT OF LAND
Economic rent ≠ Monthly rental payment
= Surplus/excess earning from land

When DD for land is increase, it will increase the scarcity

level, the rent will increase due to the inelastic of land SS

Higher offer will outbid other potential buyer

Scarcity rent

Transfer earning = the amount that a factor must earn

to prevent it from transferring to another use. In
Earning property, the sale price of land for transaction VS
owner refuse to sell his land

http://thismatter.com/economics/economic-rent.htm
 DETERMINATION OF THE PRICE OF LAND
Demand by firms and household
 For a particular location depends upon
 Expected net revenue yield
 The price/rent is what has to be paid by a particular use to prevent
the site going to some other use
Different location
Have different use-capacities
 Pattern of differential rents emerges
 Reflects the competition between alternative uses for the sites in the market
 In long run, lands will move to its most profitable use
BRIEF DISCUSSION
Where are QS/Lawyers/Accountants/Low-
Medium Size Contractors located?

Why?
 AS A RESULT….
Land value and land uses are determined simultaneously
Land can’t be transported; it has to be used where it lies
 Land use and land value of the area will be affected by the economic
activities that are most suitable in that area which are highly dependent
upon accessibility

Plot of land differ in location

Different plot have different characteristics in terms of physical
location & surrounding area, which affect the use of land in
different area
 AS A RESULT….
Value of urban land is determined by the competing demands for its
particular location and the supply of other plots having similar or nearly
similar characteristics
 For example city center will dominated by offices & retail since the highest
accessibility and also the ability of the firms to outbid other users
 Some site having a split-use, for example shops will outbid other users for ground
floor or a building, with offices or residences occupying the upper storeys.
Supply is very limited in the city centre, but rises as we move outwards.
But since the SS is generally fixed, it is demand which will tend to dominate
price (previous graph)
LAND VALUE DETERMINANTS
Attributes of sites can be divided into 3 main groups in term of use:
1. Physical
2. Location
3. Legal
 The price of sites are influenced by the use of which they can be put
 For example: Agriculture < Residential < Commercial
 GENERAL MODEL FOR DETERMINATION OF LAND
VALUES
𝐴𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝐺𝑟𝑜𝑠𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 −𝑇𝑜𝑡𝑎𝑙 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝐶𝑜𝑠𝑡𝑠
𝐿𝑎𝑛𝑑 𝑉𝑎𝑙𝑢𝑒 =
𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑠𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒

𝑁𝑒𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
=
𝑌𝑃(𝑌𝑒𝑎𝑟𝑠 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒)
Capitalisation rate = rate of return on real investment based on the income the property is expected to generate.
For example, a net rental income of a shop house is RM 12,000 per annum, and the market value of the
shop house is RM300,000. By using the formula below, the capitalisation rate will be at 4%

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑠𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒@ 𝑌𝑖𝑒𝑙𝑑 (%) = 𝑋 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 @ 𝐿𝑎𝑛𝑑 @𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦 𝑉𝑎𝑙𝑢𝑒
Assuming a property is let at a net rental income of RM50,000 pa and applying cap
rate of 4%, the capital value is…

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑠𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒@ 𝑌𝑖𝑒𝑙𝑑 (%) = 𝑋 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑉𝑎𝑙𝑢𝑒

𝑅𝑀 50,000
4= 𝑋 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑉𝑎𝑙𝑢𝑒

𝑅𝑀 50,000
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑉𝑎𝑙𝑢𝑒 = 𝑋 100
4
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑉𝑎𝑙𝑢𝑒 = 𝑅𝑀 50,000 𝑋 25 = RM 1,250,000
 𝑁𝑒𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝐿𝑎𝑛𝑑 𝑉𝑎𝑙𝑢𝑒 =
𝑌𝑃(𝑌𝑒𝑎𝑟𝑠 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒)

𝑅𝑀 50,000
𝐿𝑎𝑛𝑑 𝑉𝑎𝑙𝑢𝑒 =
0.04

𝐿𝑎𝑛𝑑 𝑉𝑎𝑙𝑢𝑒 = 𝑅𝑀 1,250,000

 GENERAL MODEL FOR DETERMINATION OF LAND
VALUES
Revenue – influenced by the investor’s Expected cost is the sum of: Capitalisation rate affected by:
expectation of • Local property taxes • Interest rates, inflation etc
• Size of the market • Operating cost • Allowances for anticipated risk
• Income spent for various urban • Interest on capital • Expectation concerning capital gains
services • Depreciation allowances
• Supply of competitive urban land
• Prospective investment in public
improvement
PATTERN OF LAND VALUES
 FACTORS INFLUENCING URBAN LAND USE
PATTERN
Topography features – hilly, flats, water features etc
Climate condition – rainfall, wind, sunshine, urban heat island etc
Past and present social and religious customs – land allocated for
mosques/churches/temples etc
Legislation and legal decisions - T&P, local authority, leasehold/freehold
etc
Demand for goods and services – location, ease of accessibility
Policy of local and central government in the supply of public utilities and
social services – roads, rails, public transportation, internet/water/electric
services
As a result of competition, DD and SS, land is developed to its highest and best use
FACTORS INFLUENCING URBAN LAND USE
PATTERN
Commercial and similar uses
Located in city centres
 Able to pay high land prices and benefits
of maximum accessibility and
convenience
Rents serve to act as sorters and
arrangers of land use patterns
Commercial and industrial uses
Can attract land away from
residential uses
 FACTORS INFLUENCING URBAN LAND USE
PATTERN
Complementary purposes
 Eg. Principal use: Office and retail
Complementary uses:
Commercial (e.g. hotels, restaurants, entertainment centers);
Residential (e.g. service apartments, private housing, public housing)
Recreation (e.g. theatres, cinemas, museums, parks, gardens and open
spaces);
Transportation (e.g. roads, MRT stations, MRT rail lines, bus stops,
carparks).
 Enhance the land values
 More compatible
Development in transport system
 May also lead to changes in urban land values – nearby new airport/bus
station/LRT/MRT stations
 GENERAL PATTERN OF LAND USE
Various model available
 Does not work so simply and land-use patterns cannot be easily classified

No model that can adequately account for the wide

differences
Basically:
Pattern of land use in urban area is a reflection of the demand and supply
of sites
Process of competition – to secure a site
In term of greatest return from the accessibility advantages
BROAD PATTERN OF LAND USE (HARVEY)
1. Central business district (CBD)
2. Zone of transition (mixture of land uses)
3. Suburban areas
4. Rural-urban fringe
CBD
Greatest accessibility – optimum location for shops, commerce and
services, focus of intercity transport
Due to accessibility, growth in population & economic activities increases
competition for the limited space available thus consequently increase
land values leads to changes in the CBD
Usually commercial users will outbid other users households – houses
converted to shops and offices
Public administration, library, main post office and so on are often found in
CBD
Greater intensity of development takes form of multi-storey buildings
CBD KUCHING
 ZONE OF TRANSITION
Consist of mixture land use – residential, commercial & light industry
As commerce & retailing have taken over in the CBD, subsidiaries activity such
as warehousing, wholesaling moved to zone of transition
In constant changes due to increase in population & income growth
In a long run especially for the old cities/old town with old buildings will
caused the emergence of slums area due to deterioration of building,
abandon industrial area, lack of redevelopment, density control and
planning restrictions.
EXAMPLE OF ZONE OF TRANSITION - KUCHING
SUBURBAN ZONE

Accessibility to CBD by roads or rails.

Includes facilities such as schools, medical centres, mosque, church
Large establishments such hospitals and universities are moving outskirts
to enjoy lower rents and easier expansion than in central sites.
Office development increasingly taking place, sometimes creating
satellite commercial center
EXAMPLE OF SUBURBAN ZONE - TABUAN
EXAMPLE OF SUBURBAN ZONE – KOTA SAMARAHAN
RURAL-URBAN FRINGE
People are willing to commute to work in towns from well beyond
the suburban zone
Even if people are willing to live in a full country or villages, they
are still mainly dependent on the towns for their livelihood
 BROAD PATTERN OF LAND USE (HARVEY)
The broad pattern of land use explained
1. Pattern of land use of the urban area
2. Fall in land values from the center to the periphery (fringe/border)
3. How the urban grows
4. Land use alters/modified by changes in:
i) The site & composition of the city’s population
ii) The level of distribution of income
iii)Technology – road transport, IT, etc
iv) Social & economic organization of community life – normal behaviour e.g. car ownership, spending
habits, etc
v) Government policy
vi) Growth of urban area
The basic pattern eventually results – a separation between workplace and residence
OTHER MODELS
Discuss in a group of 3/4 on the models below and prepare a brief presentation. You
have 1 hour.
1. Von Thunen Model
2. Concentric Zone Theory (Burgess)
3. Radial Sector Model (Hoyt)
4. Multiple Nuclei Theory (Harris & Ullman)
5. Bid Rent Model (Alonso)
 VON THUNEN MODEL
Was a skilled farmer who has knowledge in economics (http://www.sjsu.edu/faculty/watkins/thunen.htm)

Initially the model explain in terms of agriculture land, but has been expanded to other
land use
This model able to explain
 Pattern of land use of the urban area
 The fall in land values from center to periphery
 How urban grows – since each zone tend to expand in the next zone

The model concentrates on differences in the relative importance of transport costs in

different types of production
Underlying principles have been basis to others where:
 Land rent – value will decrease when it gets farther away from central market
 Distance decay – various things such as pedestrian traffic, street quality, quality of shops, height of
building, and prices of lands declines as the distance increases
 VON THUNEN MODEL
The assumptions:
1. 2 types of urban user – commercial
and residential
2. All urban user prefer to be near the
centre of the town because of its
accessibility
3. Commercial user can outbid
residential user
4. Differences in transport routes and
topography can be ignored
(Harvey, 2004)
VON THUNEN MODEL
Firms will oust households from CBD
The outcome will be a commercial zone of radius OC, surrounded
by a residential zone
Land values will fall from the centre to the periphery as indicated
by the thick line LP which shows highest bid at any point
(Harvey, 2004)
CONCENTRIC ZONE THEORY (BURGESS)
Developed by EW Burgess in 1925 from an examination of development of
Chicago in 1890s.
The theory illustrates the typical process of urban growth by a series of
concentric circle expanding radially from the CBD
Direct adaptation of Von Thunen – deals with concentric representation
Recognised transportation and mobility behind spatial organization of urban
areas
5 zones are observe
CONCENTRIC ZONE THEORY (BURGESS)
 https://people.hofstra.edu/geotrans/eng/ch6en/conc6en/burgess.html

CONCENTRIC ZONE THEORY Zone I: Central Business District (called the "loop" in
Chicago) where most of the tertiary employment is

(BURGESS) located and where the urban transport infrastructure is

converging, making this zone the most accessible.

Zone II: Immediately adjacent to the CBD a zone where

many industrial activities locate to take advantage of
nearby labor and markets. Further, most transport
terminals, namely port sites and railyards, are located
adjacent to the central area.

Zone III: This zone is gradually been reconverted to other

uses by expanding manufacturing / industrial activities. It
contains the poorest segment of the urban population,
notably first generation immigrants living, in the lowest
housing conditions.

Zone IV: Residential zone dominated by the working

class and those who were able to move away from the
previous zone (often second generation immigrants). This
zone has the advantage of being located near the major
zones of employment (I and II) and thus represents a low
cost location for the working class.

Zone V: Represents higher quality housing linked with

longer commuting costs.

Zone VI: Mainly high class and expensive housing in a

rural, suburbanized, setting. The commuting costs are the
highest. Prior to mass diffusion of the automobile (1930s),
most of these settlements were located next to rail
stations.
CONCENTRIC ZONE THEORY (BURGESS)
CONCENTRIC ZONE THEORY (BURGESS)
Problems with the theory
1. May not apply to current cities or cities outside the US
2. The theory set where the motorized vehicles and highways are still
uncommon
3. Other cities such as in pre-industrial European cities for example did not
follow this theory as the social status is focus on the center than the
periphery
4. The theory assumes the land is flat and unchanging landscape – physical
features such as hilly and water features area may make some locations
desirable for residential
RADIAL SECTOR MODEL (HOYT)
Related to Burgess – elaboration of concentric zone theory
It refers to the allocation of housing in the urban areas and only indirectly to
business location
Suggested that high quality housing tends historically to expand outwards from
the centre along lines associated with the speediest transport routes
Other reasons for sectoring are
 High-lying areas are healthier than badly drained lowlands and the prevailing winds carry
factory smoke away from high-income housing
 High quality areas of housing also exert a repelling effect on dissociated activities such as
manufacturing and wholesaling
 Figures shows residential areas are segregated by income and spread in different sectors
off the city
 As inner areas become abandoned for high rent residences, they are infilled by the low
rental groups
RADIAL SECTOR MODEL (HOYT)

/Wholesailing & light manufacturing

/Low income housing
/Middle income housing
/High income housing
 RADIAL SECTOR MODEL (HOYT)
Assumptions
 Settlement develops along transport routes
 Town radiate out of CBD
 Low income & industrial areas line next to each other
 Wealthy people choose the best site

Critics
 Old & too general
 In reality most zones contain more than one land use
 Doesn’t consider the impact of urban renewal schemes
 MULTIPLE NUCLEI THEORY (HARRIS & ULLMAN)
Move away from concentric zone notion
Harris & Ullman argued that cities do not grow a single nucleus but several separate nuclei. Each
nuclei act like a growth point
In largest city – have a structure which essentially cellular and tend to develop a number of nuclei
which serve as focal points for agglomerative tendencies, some more important than others
The various nuclei may have different origins
 Some may have existed as minor settlements before city growth began
 Some may have developed where the growth of population and purchasing power supports a suburban shopping
and/or business centre
 Some may have evolve with the development of suburban industrial area

It provides more flexible approach to urban form than earlier models based on transportation cost
and accessibility to a single central core
MULTIPLE NUCLEI THEORY (HARRIS & ULLMAN)
ALONSO MODEL / BID RENT THEORY
Extension to Von Thunen
The model shows how much different sectors of the economy are prepared to pay for
land
Commercial interest occupy sites at the heart of the city
Industrial – transition zone, just outside the centre (mixture of land uses)
Housing – suburban locations
Basic assumption – land users bid against one another paying high rent for proximity
to the center of business on transportation cost. Hence, rent is a function of distance
from the centre of economic activities.
ALONSO MODEL / BID RENT
THEORY
CONCLUSION
Various theories described must be regarded as being
complimentary to one another rather than exclusive
The later one modifying the earlier to take account of
 Movement of population
 Movement of employment – to the suburban
Thus, together they explain the patterns apparent in the modern cities
While models suggest how the cities grow, they fail to explain why
they grow
Most of these models are essentially static as they explain land use pattern
They do not explicitly consider the processes that are creating or changing
them
CONCLUSION
In summary, factors which determine land use and, in consequent, land values
1. Location – primarily from standpoint of accessibility and compatibility with
adjoining uses
2. economics - with particular emphasis on supply and deman, and through this the
satisfying of a need or want
3. Topography – with the main emphasis in the physical characteristics of sites acting
as sorters of suitability for specific uses
4. Tenure – freehold or leasehold and if leasehold the term and condition of lease
5. Servitudes (rights over neighbouring land) – existence of otherwise of easement
such as right of way, light and drainage, and or restrictive covenants (e.g. only
certain colour of building, no of occupants etc)
6. Legislation – Town and Country Planning, Building Regulations and other statutory
controls