Real Estate Characteristics

Real estate has several unique characteristics that affect its value. There are economic characteristics and physical characteristics. Real estate is a product to buy but it is different from any other due to the characteristics that will be discussed here.

The economic characteristics that influence value are scarcity, improvements, permanence, and area preference. Scarcity is demonstrated simply by the saying, “They don’t make any more.” The supply of land has a ceiling and it is not possible to produce more than what exists today. This value of this offer, however, is influenced by other characteristics.

Improvements, such as buildings on a parcel of land, can affect the value of neighboring parcels or the entire community. If a large company builds in a certain depressed neighborhood, the value of living there will likely increase due to the introduction of jobs. This value would have an impact on neighboring communities, thereby increasing the value in some way to real estate in these areas.

Permanence has to do with infrastructure. As buildings, houses, or other structures are demolished, the infrastructure, such as sewage, drainage, electricity, and water, remains intact. Permanence affects real estate, or the type of infrastructure. If you buy land in an area without utilities, drainage, or paved streets, it will most likely be worth less than land that has this infrastructure intact and developed.

Area preference refers to the choices of people in a certain area. Most people generally refer to this when talking about real estate as “location, location, location.” The location of a preferred area, for whatever reasons, is what makes home values ​​higher. Conversely, being in a non-preferred area, for whatever reason, is what causes lower home values. New 8,000-square-foot homes on Long Island’s shoreline, East Hampton, will be worth much more because of your site preference, over an area with starter 1,200-square-foot homes in the middle of Long Island, located next to a landfill. trash.

The physical characteristics of the earth represent its indestructible nature, immobility and inhomogeneity. Working backwards, we’ll start with inhomogeneity. This simply points out that no two parcels are the same. Two pieces of land can be very similar, but each piece of land is different geographically because each piece of land is located in a different place. This includes two lots next to each other. It is important to remember that parcels are created by subdivision of land, so when a large 20 acre parcel is subdivided, each individual parcel becomes its own separate piece of land.

The earth cannot move, therefore it is immobile. Even when the soil is torn from the ground, the part of the Earth’s surface will always remain. It is important to note here how this physical feature affects the law and real estate markets. The immobility of land is the reason why real estate laws and markets are local.

The indestructibility of the earth simply means that it is durable and cannot be destroyed. It can be damaged by storms and other disasters, but it endures and withstands the changing times and will always be there. This is one of the main reasons why land is talked about as a good investment.

Thus, the basic characteristics of real estate include scarcity, land improvements, permanence, area preference, non-homogeneity, indestructibility, and immobility. Keep in mind that there is a big difference between land and real estate. The land is the part of the earth’s surface, the subsoil and the air above it. Real estate is anything that is attached to land. So when you’re looking for investments, it’s important to consider the infrastructure of the area, the surrounding neighborhood, and preferences for the area or… location, location, location!