ThePropertyMarketEnvironment1

Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,The Property Market Environment,October 12, 2024,The Property Market Environment,Location and Land Use,2,Microeconomic Theories of Land Use,Rent - Payments for land services,Land Rent and Fertility,Ricardo,Rent as a residual,Land Rent and Accessibility,von Thnen,rent for a given land use declines as the distance to the market increases,The Bid-Rent Function,The bid-rent for land equals the difference between total revenue and total costs,Linear case,price received after transportation costs are covered declines with increasing distance from the market, i.e. Bid-rent functions negatively sloped,The Bid-Rent Function,Non Linear case,convex bid-rent function,a result of factor substitution,farmers substitute non-land inputs for land as the price of land increases,The bid-rent function now also reflects differences in production costs as well as transport cost differences,The Non-Linear Bid-Rent Function,The Bid-Rent Function,Transport costs and the slope of the bid-rent function,a fall in transport costs will decrease the slope of the bid-rent function, i.e. greater accessibility as a result of a new motorway results in marginal land being brought into production,Transport Costs,And the Bid-Rent,Function,Two Land Uses:,The activity with the steeper bid-rent function locates near the market,Bid Rent Functions and Land Use in the Monocentric City,The activity with the steeper bid-rent function locates near the market,A model of land use in the monocentric city (core-dominated city),Dominant urban form until the early part of 20th century,Now multicentric more important,Bid Rent Functions and Land Use in the Monocentric City,Need to understand the forces behind the development of the monocentric city if the transition from the monocentric urban form to a multicentric one is to be understood.,Lessons from the monocentric model can be extended to the modern multicentric city,Key Issue:,The Urban Built Environment is Path Dependent,Bid Rent Functions and Land Use in the Monocentric City,office,manufacturing,residential,Employment Location,Location theory can illuminate the forces that attract and repel activities from urban areas and create variations in urban growth rates,Theories of Industrial Location,Classical Location Theory - least cost location theory (,Weber),Only cost differences relevant to the location decision,=,transportation costs,The Structure of Transport Costs,Transport costs of a firm with a single market and a single raw material, considering terminalcosts and decreasing costs,Agglomeration Economies,Agglomeration Economies - cost reductions that occur because economic activity is carried out at one place,Localisation Economies,Benefits derived by firms in a particular industry from locating near to each other,Urbanisation Economies,Benefits derived by firms in many different industries from locating in the same area,Agglomeration Economies,Sources of economies resulting from agglomeration:,Cheaper provision of supplies and services (in particular specialized supplies and services) because of economies of scale.,Increases in available labour skills.,Provision of facilities - e.g. space.,But agglomeration diseconomies increased,Higher cost of space,Higher wage cost,Increased congestion.,Other Factors which cause Processing Costs to vary with Location,Labour Cost Differentials.,low cost of living areas,labour militancy,productivity quality,skill profile (education / training policy),Levels of Taxation,business and property taxes,personal (recruitment problems).,Public Policy,local business subsidies/policy initiatives,planning policies.,Industrial dispersion.,Office Location,Three groups:,Finance, Insurance and Real Estate (F I R E),Largest city/ telecommunications,Administrative offices e.g. head offices.,Access to specialist services,Business services (location determined by their need for proximity to the other groups).,The dual role of the elite,Office Location,Change,Routine moves out ?,Importance of the impact of the information economy on service sector location dynamics,Relationship between advances in information technology and the demand for face to face contact,The office as a nexus of information exchange,Retail Location,Location, location, location and location again,The Retail Leisure Experience,Economies of scale and scope,Consumer Profile,Microfactors,Market characteristics,Footfall,Anchor tenant image,Residential Location,Supply side theoriesfilter down,E.W. Burgess (1923) Concentric Zones.,Homer Hoyt (1935) Sectors and Zones.,Location depends on quality (age) of property,The wealthiest live in the newest housing,Filter Down,Filtration of the housing,stock from one income,group to the next,Demand Side: Space - Access Trade-off,Households consider transport costs and rents,Quality of housing depends on location,Basic assumptions of trade-off theory:,i)single work place at the city centre.,ii)uniform travel costs.,iii)no topographical features.,iv)cost less adaptation of housing.,v)no externalities of any kind.,The Space Access,Trade-off,Trade Off Theory,Household in choosing its location trades off transport costs against housing costs.,Three factors to consider in choosing its location:,1)amount of space required;,2)direct cost of travel,3)opportunity cost of the time spent traveling.,Results:,More workers per household locate nearer to centre.,Larger householdslocate further from centre.,Trade Off Theory,As income increases the households demand for space increases and the value of traveling time increases, so where to locate,Which force dominates ?,Elasticity of demand for space with respect to income,Trade-off theory provides a better explanation of location patterns in large cities,Extensions,Family size and the residential bid-rent function,Income and the residential bid-rent function,Central City Pollution and the Residential Bid-Rent Function,Extension:Residential Density,Need to modify trade-off theory to recognize that households are not indifferent to variations in residential density but prefer to live at lower rather than higher densities.,as income rises demand for low density rises.,also density influenced by ownership (past) of land,Social Agglomeration,Externalities which lead people of the same type to want to live close to each other.,Utility interdependence.,External economies - services.,Favorable physical environment.,Tiebout Hypothesis,Tiebout (1956) A Theory of Social Agglomeration.,Influence of fiscal variables on location decisions.,Choice of local public goods / local taxes bundle. Individuals Vote with their Feet.,Results in each local government area being occupied by the same kind of household.,The Issue of,Gentrification,Shift from basic to non basic industries.,Shift in type of manufacturing activity carried out.,Socio-economic characteristics of service sector workers - DAPY,Social agglomeration.,Urban regeneration policies.,Empirical Evidence,Employment Location,The role of transport costs,Labour-force access,Productivity, education,labour skills, business climate,infrastructure, amenities,Agglomeration Economies,Empirical Evidence,Residential Location,Multiple-Access Residential location,Role of commuting costs,Residential Location has a greater effect on job choice than job location on residential choice,Access to non-job related activities,.,land use planning system,Rabbit Hutches to Hamster Hutches,