LAND

MARKETS
 WHAT IS A LAND MARKET??
• A market is a site where buyers and sellers exchange goods, services or
information
• It consists of a framework of institutions, social practices, relationships,
regulations and actors, all of whom participate, in one way or another, in the
production and exchange process.
• Land is unlike other commodities that can be bought and sold in that it is
immoveable.
• Land markets exist when and wherever it is possible to exchange rights in land for
agreed amounts of money or services rendered.
• Without an integrated and formalised real property system, a modern economy is
not viable since the ability to create national wealth is severely restricted.
• An efficient land market underpins the capacity of banks and other financial
organisations to lend money and for landowners to invest.
WHAT IS A LAND MARKET??
• Where private rights in land are
recognised, they may be
exchanged for a consideration,
usually money.
• A land market can be said to exist
when the number of these
transactions passes a critical
threshold

• Generally regulated through land

tenure and land administration
systems.
FACTORS INFLUENCING LAND MARKETS

As with any market there is a

degree of volatility that depends
upon the state of the national
economy, social and political
attitudes and global influences
 IMPORTANCE OF LAND MARKETS
• All Economic development depends to some degree on the availability of land
• Are mechanisms that, provided there are appropriate institutional checks and balances,
allocate ownership and use rights in a manner that allows land and its associated assets
to be used in the most economic way
• Efficient and effective land market will allow landowners to turn their assets into capital
• Increase the incentive for people to invest and for financial institutions to lend
• Can improve the performance of a nation’s economy and increase prosperity
• Help to make the valuation of land and real property more transparent
• becoming global phenomena with information technology helping to create more open
markets and transactions taking place electronically across traditional market and
national boundaries
CONS OF LAND MARKETS
• may lead to more poor people becoming landless with the concentration
of land into the hands of the rich
• Creating artificial shortage of land supply increasing land prices
• Monopoly in land markets
• Middlemen and intermediaries exploiting both sellers and buyers
 FUNCTIONS OF LAND MARKETS
• They bring buyers and sellers together to facilitate transactions;
• They set prices for land
• Land markets allocate land by setting prices so that the land market "clears",
that is, the quantity of land offered for sale equals the quantity of land
demanded;
• Play an important role in ensuring that land is efficiently used
• Land and labour are called original or primary factors of production as they are
not produced in the industries
LAW OF SUPPLY AND DEMAND
• The law of supply and demand is the theory explaining the
interaction between the supply of a resource and the demand
for that resource
• Defines the effect the availability of a particular product and
the desire (or demand) for that product has on price
• A low supply and a high demand increases price,
• The greater the supply and the lower the demand, the lower
the price tends to fall.
 SUPPLY OF LAND
• Land is a free gift from nature and therefore its quantity is fixed by nature.
More land cannot be produced in response to greater demand for it
• determined by topography, distribution of infrastructure, master plan and
zoning policies, and the willingness of land owners to sell parcels
• Natural limits on the land supply -Steep slopes, wetlands and hazardous areas
limit the supply of land
• Location and other characteristics -
• Policies, laws and acts in place – conservation rules, property transfer rules
• Administrative set up
DEMAND OF LAND
• Derived from various activities using land: housing, factories, retail
shops, farms, government facilities, etc.
• Location, geography and natural features
• Infrastructure development in the area
• Economic gain/ profit through land transactions
• Development control regulations
• Tax exemptions
• availability of credit to finance land
 REQUIREMENTS FOR EFFICIENT LAND MARKETS
• Well defined property rights - and buyer can clearly determine what they can
and cannot do with land and property
• Voluntary participation -must not be forced into market transactions
• Many buyers and sellers - no one seller or buyer will be able to control or
influence market prices
• Free entry and exit - produce market outcomes which allocate resources at their
lowest possible cost.
• Perfect information -about prices, costs, products, and buyer and seller
preferences.
• Similarity of product - focus more on costs and prices than on product
characteristics.
 REQUIREMENTS FOR EFFICIENT LAND
MARKETS
• Low transaction costs for all users
• Access to credit
• Protection of minorities
• Opportunities to raise revenues through land and property taxes;
• Support for social, economic and environmental sustainability
• Public/private partnerships to provide value for- money services.
 GOVERNMENT INTERVENTIONS IN LAND MARKETS
• Clear policies and enforceable laws, the institutional framework needs
to provide for consistent, responsible and accountable decision-
making within the overall national land policy.
• Eliminating market imperfections and failures to increase operating
efficiencies.
• Removing externalities so that the social costs for land market
outcomes correspond more closely to private costs.
• Redistributing society's scarce resources so that disadvantaged groups
can share in society's output.
LAND PRICING
• Land value can be defined as the monetary cost of the land. It can be the
cost of undeveloped land or a built property but land value is primarily
associated with a vacant plot
• Is determined by the economic principle of highest and best use of land
which produces the highest net return in any term, over a period of time.
• Buyers typically bid for sites offered for sale on the market
 FACTORS INFLUENCING LAND PRICES
• Physical attributes: quality of location, topography, climate, availability of water,
sewer lines, etc.
• Accessibility to economic activities: The more easily there is accessibility to
economic activity, the more is the value of the land.
• Neighbourhood amenities: availability of the facilities such as shopping areas,
medical facilities, school, parks& playgrounds, and other basic need of the humans.
• Present and future land use: by the land use permitted in the land premises.
• Demand and Supply Function: Anticipation of high yields may also induce false
scarcity of land;
• Location and Transport Linkages: The property located in the area of high level
of infrastructure facilities or the one located in or adjacent to the area of
economical intensive activities such as markets or industries have higher values