Real Estate Market Analysis

Reporter: IRINE M. ILIGAN

Instructor: JOAN RUTH CABANSAGAN
 What is Market Analysis?
A MARKET ANALYSIS is a study of the current supply and demand
conditions in a particular area of a specific type of property, used (1) to
identify the most likely users of the project, (2) to indicate how well a
particular piece of real estate will be supported by the effective market
demand, and (3) to indicate how well the market is being served by the
existing supply of properties. Essentially, the study will show if there is a
need and effective demand for a new project, or if an existing project has
a good long-term investment prospect.
REMINDER:
Caution should be made when investing in an
unbalanced market. When supply of a certain
type of real estate is short, rents and prices may be
high, but only temporarily. New projects will add
to supply and drive prices down. By contrast,
when a market is oversupplied the must be low
enough to be an attractive investment.
Market analysis is part of feasibility study to
estimate the trend of rent increase or sales for new
projects. This is called absorption rate. It may be
expressed as an overall absorption rate (i. e., the
market needs 2,000 new units per year at the price
range of P800,000 to P1,500) or a specific rate for
the project (given current competition, the project
should capture 200 new rentals per year). This
absorption rate estimate is important in projecting
the revenue production of a property.
In performing a market analysis, a consultant must observe the
following specific guidelines when applicable:
(a) define and delineate the market area (c) identify, measure, and forecast the
and supply appropriate market effect of anticipated development or other
segmentation, changes and future supply,

(b) define and analyze the current supply and (d) identify, measure and forecast the
effective demand conditions that make up effect of anticipated economic or other
the specific real estate market segment, changes and future demand.

(Standard Rule 1-4, USPRCP)

The analysis of economic changes in the market in which
the property is located may include the following
determinants of demand:
(1)population, employment, and income characteristics;
(2)interest rates; (3)zoning and other regulations; (4)rents

and/or sales; (5)new construction planned or underway;

(6)vacant sites as potential competition to the subject;

transportation; (7)taxes; and (8)the cost and adequacy of sewer,

water, power, and other utilities.

Forecasting techniques should be relevant, reasonable,

practical, and supportable. Regardless of the forecasting
models employed, the consultant is expected to provide a
clear and concise explanation and description of the model
and methodologies.
Key Takeaways:
The consultant is expected to provide a comprehensive physical and economic
description of the existing supply of space for the specific use within the defined
market area, an explanation of the competitive position of the subject, and a
forecast of how anticipated changes in future supply (additions to or deletions
from the inventory) may affect the subject property.
The analysis of economic changes in the market in which the property is located
may include the following determinants of demand: population, employment,
and income characteristics; interest rates; zoning and other regulations; rents
and/or sales; new construction planned or underway; vacant sites as potential
competition to the subject.
THANK YOU!!!