1.

REAL ESTATE MARKET

ANALYSIS
 DEFINITON:

A study of the current supply and demand condition 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 the properties.

 Essentially, the study will show

 if there is a need and effective demand, or
 if an existing project has a good long-term investment prospect.

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 Caution should be made when investing in an UNBALANCED MARKET.
 When supply is short, rents and prices may be high – but only temporarily
 When a market is oversupplied, the price must be low enough to be an attractive investment.

Market analysis is part of a Feasibility Study.

 To estimate the trend of rent increase or sales for new projects ( called the absorption rate ).
- This absorption rate is important in projecting the revenue production of a property.
It may be expressed as
• an overall absorption rate , or
Ex.: the market needs 2,000 new units per year at the price range of P800,000
to P1,500,000 )
• a specific rate for the project ( given current competition)
Ex.: the project should capture 200 new rentals per year

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 A Consultant must observe the following specific guidelines , if possible: ( Standard Rule 1-4, USPRCP )
(a) define and alienate the market area and supply appropriate market segmentation
(b) define and analyze the current supply and effective demand conditions that make up the
specific real estate market segment
(c) identify, measure, and forecast the effect of anticipated development or other
changes and future supply
(d) identify measure and forecast the effect of anticipated economic or other changes and
future demand

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The analysis of economic changes in which the property is located include the following determinants of demand:
 population , employment and income characteristics
 interest rates
 zoning and other regulations
 rents and/or sales
 new construction planned and underway
 vacant sites as potential competition to the subject
 transportation
 taxes, and
 the cost and adequacy of sewer, power, and other utilities

Forecasting Techniques should be relevant, reasonable, practical and supportable.

The consultant is expected to provide a clear and concise explanation and description of the model and
methodologies.

A 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.

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THANK YOU