De La Salle- College of St.

Benilde

RECONFU

Overview of RE Consulting & Brokerage Practices

CASTRO, ALETTEYA                                                                         BS-REM  

 

We are in an uncertain era. Yet it is quite simple to find economists who are persuaded that the free market has
failed, even in these uncertain times. Naturally, these economists have emerged practically everywhere in the aftermath of
the most recent financial crisis, rejecting economic theory in favor of myths that economists have long since disproven. These
people are frequently bright, so it's not like they lack intelligence. The imprecision and shallow analysis that George Stigler
referred to as being more common in journalists, however, is something that many brilliant individuals fall to. Our daily lives
are influenced by economics. Understanding economic theories from the past, present, and future will help us apply them to
societies, governments, businesses, and people.

Real estate economics is the application of economic principles to the real estate market. Real estate economics explains
why real estate activity fluctuates and how these variations may impact real estate markets. Real estate decisions are made
by investors and licensed agents that affect how a community's properties are shaped, developed, and valued. Real estate
decisions made today will have an impact on future city and local real estate prices. Real estate is a type of real property and
refers to the land as well as any permanent, whether natural or artificial, constructions or improvements associated to the
property, such as a house. Understanding real estate economics may be useful for real estate agents, investors, and others,
which is why it is significant. Through market understanding, success may be attained in the right way. Using this sector
expertise, some specialists can spot trends and make millions of dollars.

There are theories to be aware of when we analyze the economic significance of real estate using the concept of real
estate economics that has been provided. Examples of theories and contemporary scenarios are shown below.

The Ricardian Rent Theory. This theory was developed by David Ricardo, an English classical economist. Ricardo
used the economic and rent to analyse a particular question. In the Napoleonic wars (18.05-1815) there were large rise in
corn and land prices. In his theory, rent is nothing but the producer’s surplus or differential gain, and it is found in land
only.The Ricardian theory of rent is based on the following assumptions; First, The cost of renting a piece of land is
determined by the fertility or topography of the various land parcels. It develops as a result of the soil's inherent and
unbreakable abilities. Second, In the instance of land cultivation, Ricardo assumes the application of the law of diminishing
marginal returns. Even if the overall cost of production in each parcel of land is the same, the yield from the less fertile plots
of land decreases since they have lower fertility. Third, Ricardo looks at the supply of land from the standpoint of the society
as a whole. And lastly,  In the Ricardian theory it is assumed that land, being a gift of nature, has no supply price and no cost
of production. So rent is not a part of cost, and being so it does not and cannot enter into cost and price. This means that
from society’s point of view the entire return from land is a surplus earning. As a result, Some developers could take
advantage of a high demand for a property by offering rent-to-own options or just charging rent as is. As a result, some
landowners or developers continue to own the property while still receiving compensation for it.
 The Neoclassical rent theory. This is the theory that land is used not only for one purpose, but other purposes also.
In the neoclassical rent theory, the rent of land was merely another aspect of a general price theory. Rather than a question
of the distribution of income. Economic players use resources to pursue these rents, which are created by the government,
and from the perspective of society, these expenditures are "wasted." For example, The Manila Tondominium, a Mayor Isko
Moreno initiative for low-income Filipino workers, seeks to assist or offer accommodation for low-income workers in Manila.
Although Vista and SMDC is likewise reasonably priced and close to the Tondominium, the consumer's decision as to where
to reside would still prevail.

The urban rent theory. This theory considers the price of land would decline at the decreasing rate with distance
from the city center. The location of the various activities within the urban area in the absence of planning constraints will be
determined by a trade-off between the cost of transport to the center and the cost of land in terms of residential location. By
increasing the distance from the central business center, this relates to how the price and demand of real estate fluctuate.
According to this, various land users would contend with one another for land around the city center.

As a result of the aforementioned theories, we may conclude that real estate economics is both intricate and
fascinating to study. Since it enables us real estate professionals to understand how real estate, one of the major contributors
to our economy and society, is now making progress.