REE-3043 Lecture Notes - Lecture 8: Longrun, Capital Market
21 Sep 2017
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The man who owns 2 billion acres of land lives in tallahassee down appalache parkway. Location makes markets interesting: perfectly competitive market characteristics include, product homogeneity, free markets no transaction costs, perfect knowledge about the competing goods and identical future expectations. Individual buyers or sellers cannot influence market prices: products can be divided and are mobile. The asset market: who participates, on the equity side, corporations and partnerships maintain the largest positions of the commercial real estate asset market. Prices vary according to conditions in the capital market: to(cid:271)i(cid:374)"s q, q (real estate) = price (or value) / replacement cost. If q > 1, opportunity to develop competing property and sell them for abnormal profit. If q < 1, price of properties cheap relative to replacement cost: equilibrium condition as q=1. Questions: perfectly competitive asset markets include all of the following characteristics, except highly regulated.
