Economic Characteristics of Land
What are the economic characteristics of land?
Did you know there are economic characteristics of land? Probably not. There are also physical characteristics of land, but we will save that for another article.
There are four economic characteristics of land as follows:
1 – Scarcity
Scarce means there isn’t much of something around. Well, scarcity means the same thing. Land is not limitless. Yeah, about a quarter of the earth’s surface is land, but once it’s gone, it’s gone. This can have a significant impact on the value of a property. Especially in highly populous areas, such as Long Island. The more scarce the land, the higher the price. It is a supply and demand concept.
2 – Improvements
The economic characteristic of improvements (also known as modification), states that improvements to a piece of land can have either a positive or negative impact on its value. Adding a pool and landscaping to a home will increase its value. If a nuclear power plant is built, the surrounding land values will decline.
3 – Permanence of investment
Permanence of investment is also known as fixity and means investments in real estate are long-term. This is due to the physical characteristics of indestructibility and immobility. Since land is immobile, investment in property becomes fixed. Land cannot be moved if the market becomes better in another location.
Since real estate transactions are complex and large amounts of money are involved, they are not made very frequently. As a result, a real estate investment is a long-term investment.
4 – Area preference
Area preference (or situs) is the most important economic characteristics of land. Situs is based on many factors, such as history, convenience, and reputation. A home in a neighborhood with great schools and a low crime rate will generally command a higher price. A house in a high crime neighborhood with poor schooling would be priced lower.
What else can help me prepare to pass my real estate licensing exam on my first attempt?
Other tips to help you pass your real estate licensing exam on your first attempt:
Also, check out our question of the day videos on our YouTube channel: