Flashcards in Chapter 9 Market And Market Analysis Deck (26)
What is market analysis
Market analysis is the identification and study of the market for a particular economic good or service
-broad market viewpoint
-the market within which the subject competes
What is a marketability study/analysis?
It refers to the sale, absorption or lease of a specific property under current or anticipated markey analysis and *must be included in all appraisals. Marketability analysis requires a capture rate.
What is a capture rate?
Its an estimated percentage of the total potential market for a specific type of property that is currently absorbed or forecast to be absorbed.
Short term capture - is absorbtion rate
Long term capture is - the share of the market
Market/marketability analysis is helpful in 3 ways
-interaction of demand and supply and its effects on value for current and future markets.
-determining highest and best use (HBU)
-comparative advantage and disadvantages for use in 3appraches to value
Explain the fundamental concept of Market definition and delineation?
An appraiser must clearly define the real estate product and the real estate market area it competes in.
What sis product disaggregation?
It differentiates properties by attributes and characteristics: eg: class of property, legal and locational characteristics
Why does defining the real estate market help the appraiser?
It improves the understanding of and the effect of externalities
What is the Fundamental concept of DEMAND
Anaylizes the potential buyere, rentere, investors based on their needs desires and preferences and ability to purchase
Eg: Demand analysis on retail space would tell you the demand for retail services generated by potential customers.
Eg: Demand analysis on office space would attempt to tell you what businesses would occupy the space and the staffing needs.
What is demand analysis on residential or retail markets?
Investigate households in the market, disposable income, purchasing power, ages, preferences and behavioral patterns of household members
Populations projects for small areas can be misleading, what is an alternative?
Appraisers should also consult the overall projections for the metropolitan area.
Household formation varies with 4 things
income and age groups, migration and general employment
Eg: Household formation is much greater in ages 25-34 vs 35-54
Important factors in demand analyisi for an office market
-Employers who would use the office space
-Vacancy rates for that specific class of office building
-Accessibility for transportation
-Average sq ft of office space required by an employer in financial district or suburbs
-factore that affect appeal of office building are quality of construction, managment and support facilities like shops restaurants and rec centres.
Important factors in demand analysis for an industrial market?
-Presence of raw materials
- currency values and trade barriers
-employment in manufacturing, wholesale and retail
Demand for industrial property markets is generally more limited than demand in residential markets
What is competative supply?
Supply refers to the production and availability of real estate products
-interviews with developers and city planners
-Published data like CMHC
What is market equalibrium?
-theoretical balance of supply and demand
-Short term supply of real estate is relatively fixed and prices responsive to demand
If demand is high, rents will start to rise before new construction begins
-Long term supply is theoretically towards equalibrium but seldom achieved.
What is active market?
Characterized by growing demand
What is a depressed market?
Drop in demand is accompanied by relative oversupply and decline in prices
What is a buyers market?
A depressed market in which buyers have the advantage, market prices are low due to over supply of property
What is a sellers market?
Active market where sellers of available properties can obtain higher prices because there is only a few available properties
What is a strong market?
Reflects either a high demand of increasing prices or a large volume of transactions.
What is a weak market?
Characterized by low demand and declining price market aka as a soft market.
Markets are cyclical and fluctuate for different reasons?
Short vs long term
Long term cycle responds to changes in employment, population, income
Short term changes to cost and availability of credit
What is inferred analysis?
Appraiser can use historical or market conditions to infer future supply and demand conditions
Aka trend analysis and is descriptive and maybe general or specific
What is fundamental analysis?
Is a more detailed study of markey with a focus on strong quantifiable reasonable evidence forcasting future development
Although there are differnt levels of analysis, , the discipline of market and marketability comprise of 4 different types of analysis.
Appraisers must decide which variation is most appropriate for the appraisal.
-Economic base /is based on survey of indusrty and business' population and income level data
-Market (supply and demand) and marketability studies (property specific)
-Investment /profitability criteria
-Feasability/will prperty fulfill investors objectives
The conclusions of these analyses all lead appraiser to HBU