Real Estate Demand In Economics

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Today, real estate market may be outlandish and idiosyncratic in terms of its application in an intricate market of an economy. But they have to still abide by the principles of economics ¬¬– Demand and Supply. These are an analytical tool of economics, through which we can reckon the atmosphere of market conditions and opportunities of real estate, which can be categories into different type’s i.e. residential house, retail property, office property, etc. However, Dubai government’s decided to diversify from trade and oil-reliant economy into a service and tourism economy, which resulted into the property or real estate boom. And this turned Dubai into one of the fastest-growing cities in the world. However, the non-oil sector grew by 5.4…show more content…
Perhaps, this may break the price rise of residential houses. Dubai residential real estate is one of the active and diverse markets in the world, which involves 120 nationalities in 2013 with the record transaction of worth $44.06bn ( .The real estate demand can be defined as the quantity of space or number of units demanded at different prices. It is more appropriate to think of demand as a schedule as shown in Figure 2.1, just focusing on a single quantity. Figure 2.1 demonstrates the fundamental law of demand, which states that the quantity demanded declines with price or, in the terms of real estate, a lower amount of space or number of units is demanded at higher prices. And an immense amount of space or number of units is demanded at lower…show more content…
There are several proxies/indicators to analysis such changes in demand, most of which are absorption measures. Absorption is the total demand of all final goods and services within an economy. It is equal to the national income minus net export. It shows the occupied stock in the market and analysis with vacant stock in residential real estate market. Absorption = Y = C+I+G+(X-M) In real estate, it is the average of net absorption* over a long historical period. But analysts think that it is not beneficial for forecasting purpose. Why? Perhaps it fluctuates over a period of time. CONCEPTS OF SUPPLY IN REAL ESTATE In terms of residential real estate, the quantity of housing space or units supplied at various prices. It shows the direct (positive) relationship between supply and price. Law of Supply, the price elasticity of supply, drives the real estate development and investment decisions. When dealing with real estate, it is impertinent to distinguish between three supply concepts: the long-run aggregate supply, the short-run aggregate supply, and new construction. The Long-Run Aggregate

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