RE2705 Urban Economics

Previewing the Module in a Lay Way

 Concern the economic city, but not the city as legal identities.
o In the simplest form, an economic city has a core area containing
substantial population nucleus and adjacent communities having
a high degree of economic and social integration with that core.
o City of Los Angeles is too small to be a city
o City of Shanghai is too big to be a city.
o Singapore: Just nice, since it is a city state without a full-
functioning local government.

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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

Why Do Cities Exist?

 Is it expensive to live in a big city like Singapore, London, or Tokyo?

o How much do you suffer?
o Then, why do you still want to live here?
 Cities offer certain advantages
o E.g., High wages <= high productivity
o E.g., Colourful urban life.

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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

Cities cannot be infinitely big ∞

 Impossible to put the whole nation’s population at a single point.

o Limitation in construction technology. Cannot build ten times
taller than the Khalifa Tower (828 m)
o The crowdedness would be too painful to bear.
 Also impossible to grow a boundless city horizontally.
o An average citizen would not commute say 800 km for work
every day.
 The balance of economic costs and benefits determines the city size.
 Urban Real Estate is expensive owing to huge demand for a compact
physical area.

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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

Future of cities

 Traditionally, cities hosted face-to-face interactions, as physical

remoteness hindered production.
 Will technology lead to dismissal of cities?
o Internet of things
o Virtual conferences and work from home
o Global supply chain.
 If yes => Let’s stop planning a real estate career.
 The answer should not be yes if you think deeply.
 The ways cities function will evolve. We shall grow our adaptability.

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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

How to grow and sustain a world-class city?

 Where expected real-estate return is among the highest.

 The mechanism of wealth creation.
 Growth engines at different stages of economic development.
 A brief mention of Singapore’s journey towards a global city.

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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

Urban structure and urban land rent

 The urban structure (configurations of urban land uses) would

gradually change when city grows.
o Can you imagine 6 million residents of Singapore all commute to
Raffles Places every day?
o If too painful => not a liveable city => Singapore will lose appeal
=> real estate demand fade => property value collapses.
 Understand economic forces shaping urban structure’s evolution,
and know transportation technology plays a fundamental role.
 Land use is determined by real estate demand of competing sectors
(residential, industrial, commercial, etc).
 Organization of office and industrial space.
 Determinants of urban land rent.

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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

Economics of Urban Transportation

 Cars and roads have their appeals.

o With externality, road use is inefficient without government
intervention.
o Road pricing (e.g., ERP) is efficient from economists’ view but it
is often unpopular.
 Urban public transit is essential to sustainable urban development.
o Provision of public transportation is unsustainable in many cities.
o Interesting models to promote public transit against private
vehicles and the underlying economics.

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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

Urban Decentralization and Renewal

 Decentralization of economic activities from the traditional core is

necessary when big cities, like Singapore or Shanghai, continue
growing.
o Failure examples are much more than successful cases.
o What may be good principles?
 Urban sprawl
o A form of decentralization.
o Notorious in western developed countries, and some Asian
countries.
o What is the problem?
 Urban renewal
o Land use efficiency is important, but urban renewal actually
involves many thorny issues.
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A/P Liao Wen-Chi, NUS Department of Real Estate
RE2705 Urban Economics

Neighbourhoods and harmony

 Households are free to choose residential locations within a city. The

choices of the groups of people with different identities may result
in certain types of segregation, which exacerbates the common
tensions in world’s global cities.
 An appreciation of our racial harmony policy from an economic
perspective.

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A/P Liao Wen-Chi, NUS Department of Real Estate