What are the Economic Principles of Real Estate Valuation?

1. What are the Economic Principles of Real Estate Valuation? Characteristics of a Real Estate Market Real Estate is by character defined by economic, legal and financial circumstances. As the real estate market exists in a regional and national economy set-up, any changes in these economies will affect the real estate scenario in a location. Real estate is pricey because individuals, businesses and institutions want to buy property and this creates an economic value for real estate. While property rights are exchanged in their typical markets with features of their own, the exchange is influenced by marketing techniques and transactions. Real estate market is chancy Real estate markets fluctuate, where prices go up and down depending on demand and supply and changes in national and regional economies. This makes the real estate market unstable and risky, which is heightened by the involved significant capital costs. For real estate transactions to be genuine, the need for legal recognition for ownership with the rights of occupation is vital. Real estate is also subject to market risks, financial risks and business risks. A Real estate valuation is important A ​real estate valuation is important for you to calculate a prediction of price-taking clues from the market forces, factors of finance, accounting, economics, and law driving the real estate market. The Economic Principles Affecting Valuation Principle of Anticipation The principle of anticipation is a method where the appraiser uses the income approach to determine the value of a property. The appraiser will estimate the present worth of future benefits for the property. The value can also depend upon the anticipated utility for the property, or what the property can be used for. Principle of Demand and Supply

2. The value of a residential or commercial real estate goes up depending on its demand and supply position. For example, if there ain’t many properties facing beautiful scenic views, the demand for such a property will be more and the value of that property increases to meet that demand. Demand is also affected by craving. If there are too many apartments in a given area, the demand will reduce. Principle of conformity This principle is about how land is utilized in a particular area. For example, land must be used to reasonably conform to the area's existing standards. An orchard in the middle of a residential area where several condominiums have been built doesn't really conform with the current use of the land. Principle of Substitution Usually in a ​commercial real estate valuation or a residential one, a property’s value is determined by the cost of an equally desirable substitute property. This means one shouldn’t pay more for a property than what it would take to purchase a site and to construct a building of equal appeal and utility. For any ​r​esidential real estate appraisals ​enlist the support of an experienced real estate agent like RD Clifford Associates