Ethiopia Institute Technology (EiT-M)

Mekelle University
School of Architecture and Urban Planning
 •Land for classical economists, it
is all the free gifts of nature
which yields income.
•Land for a lawyer, it is the
What is surface of the earth together with
land? all subjacent & super-jacent
things of a physical nature such
as buildings, trees, minerals.
•the term land is often used to refer
to a building site, or lot, and
includes the infrastructure but
not any structures

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 •Real estate is the land itself and
everything attached to it.
•Real estate typically includes
•Land;
What is real
estate or real •Fixtures to land;
property? •Anything incidental or
appurtenant to land that
benefits the landowner;
•Anything that is considered
immovable (part of the real
estate)
•Bundle of rights –sell, rent,
give away
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 In some American states real property is
the rights of ownership of a real estate
 In other both concepts are synonym.
 Traditionally appraisers consider
 Real Estate-land & buildings
 Real Property-the legal rights of ownership
 In current practice both terms are used
interchangeably.

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 The relative fixity of supply;
 No cost of creation;
 Heterogeneity;
 Law of diminishing returns;
 Absence of a market for
‘land’; and
 Economic or scarcity rent.
 Longevity

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 is a process of conversion of land from
one use to another.
 It is the art of building real estate value by
managing development risk.
 Value is realized by providing usable
space with associated services needed so
that consumers can enjoy the intended
benefit of the built space.
 It is a process of conversion of natural
capital into physical capital

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 Normative
 norm is put on intergenerational equity
 Subjective
 we cannot objectively establish what is worth to be
saved for future generations
 Ambiguous
 contradicting goals of satisfying needs of current
and future generations
 About 200 definitions of sustainable
development exist

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 What is Sustainable Development?
 Restricted definition:
 the ability of the system to maintain its
productivity when subject to stresses and
shocks
 Broader definition:
 Sustainable development is a
development that meets the needs of the
present generation without
compromising the ability of future
generations to meet their own needs
(Brundtland Report, 1987)
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 It is a contested notion, hence,
 It does not make sense to come up with
another definition of sustainable
development
 But
 we can develop a common and shared
interpretation of what sustainability means in
a particular context

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• Preserve carrying • Increase local
capacity self-sufficiency
• Preserve & recycle • Equity
resource • Satisfy human
• Reduce waste needs
• Participation &
transparency

• Sustain economic
growth
• Maximize profit
• Expand market

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Tension Among components of Sustainable Urban
Development

POLICY POLICY
POLITICS

POLICY

SOCIAL

NEGATIVE EXTERNALITIES
ECONOMY RESOURCE DEPLETION ENVT.

CONSUMPTION VS RESOURCES

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 Real property is immovable, hence
different from other marketable goods;
 In real property market, it is the rights &
interests that are transferred rather than
the land & the buildings themselves
 It can be either formal or informal;
 Real property market is an abstract term
aggregating transactions in real property.

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 The largest collection of rights a person
can hold in real property is the freehold;
 However, this right can be separated &
transferred individually to other people.
 E.g. GoE owns land & leases it to people
 The efficiency of real property market
depends on:-
 Technical and Economic characteristics

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 Up-to-date knowledge of price differences must
be accessible by buyers & sellers;
 Dealing costs need to be small in relation to the
value of the transaction;
 Heterogeneity of real property make it difficult
to objectively assess their respective merits;
 However, valuers & agents are important in
providing info. on availability, type & price;
 Public auction is good when valuing is difficult
 Tender is good since it include consumer surplus

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 Freedom of entry to the market?
 Does the market consists of many buyers &
sellers, each so small unable to exert or monopoly
powers?
 However, certain conditions allow an owner
to gain monopolistic control:-
 Geographic division will lead to imperfect market;
 Imperfection of capital market may prevent some
would-be buyers from borrowing large sums
 The spatial fixity of RP puts owners in a better
position

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 There are two types of real estate markets:-
 Real Estate Space Market
 Real Estate Asset Market

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•The term “space market” is the
market for the usage of real property.
•In this market, tenants exchange rent
with landlords for the right to use
land and built space.
•This market is often called “the rental
market.”

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 Demand (tenants) and Supply (renters);
 “Rent” refers to the price of the right
to use space for a period of time & is
determined by demand & supply
 When the quantity of space demanded
equals the quantity supplied, the market is
in equilibrium (market rent)
 The real space market is highly
segmented, meaning that it tends to be
local in nature and specialized by
property usage

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• The term “asset market” refers to the
mechanism for the voluntary exchange of
ownership of real property.
• In this market, buyers exchange money with
sellers for ownership/use rights to land and
built space (real estate).
• This market is often called
“the property market.”

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 “Asset market” refers to the market for the
ownership of real estate assets (land and the
buildings on it) rather than the use of space
in real estate assets.
 Buyers in this market purchase real estate in
expectation of receiving future cash flows
(rent paid by tenants) or for consumption.
 These buyers could buy other kinds of assets
(stocks, bonds, etc.) that would also produce
future earnings.
 In this sense, the real estate asset market is
really a part of the larger capital market.

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