Factors Affecting Demand and Supply of Land
Land is considered as a precious commodity. Even so, there are many factors that affect its demand and supply including
The income of prospective buyers affects the demand and supply of land. High income means high purchasing power hence, increased demand for land and vice versa. High income also leads to high supply especially if the price of land is favorable.
Availability of finance and cost also affect demand and supply of land. It is essential to note that high interest rates reduce borrowing amounts that consumers can afford. This reduces the demand for land. With high borrowing amount, the demand and supply of land also increases.
Population and more specifically the demographic features of a population including rate of household formation, immigration, geographical distribution, age distribution and rate of natural increase affect demand and supply of land. High population leads to increased demand for land.
Proximity also affects demand for land. Land that is close to social amenities including parks, shops, sporting facilities, transport facilities and schools go for high prices because of high demand. The demand and supply for land with close proximity to social amenities and employment opportunities is high with increase in demand.
Rental opportunities-land that offers rental opportunities goes for a high price because of high demand. Marketers raise the value of such a land beyond that which could be bought in an area that does not provide rental opportunities.
The state of the economy also affects demand and supply of land. Land prices just like the price of many commodities in the market are affected by the state of the economy. Therefore, there is often increased demand for land in a stable economy as opposed to a poor economy. The state of economy is also affected by other related factors including employment, wealth, affluence of the population and income among others.
The surroundings affects demand and supply of land. The demand for land in good neighborhood is always high. This leads to increase in price and supply of land. However, land situated close to an airport or factory may be easily available but its demand is low because of the risks associated with it.
Time affects supply of land. If land should be sold within a short span of time, its supply is relatively fixed. However, as time goes by, there will be more flexibility in the supply of the same land due to changes in price. This also increases the demand of land bearing in mind that prices are adjusted to suit the needs of consumers.
Speculation also affects demand and supply of land. If the price of land is expected to go up, its demand will increase. Consumers prefer to buy at lower prices and even sell the same land when its value appreciates.
Allotment stocks are additionally one of the factors that affect demand of land. The rate at which land is supplied is often determined by its demand. Therefore, supply of land depends on current demand and stock of all vacant allotments as well as the motivation of the owner of such allotment.
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