Real Estate Economics Worktext

REAL ESTATE ECONOMICS
WORKTEXT
Pangasinan State University
LINGAYEN CAMPUS
Lingayen, Pangasinan
Jameson N. Estrada

PREFACE
Real Estate Economics with the course code Econ 127 uses economic theories to analyze
microeconomic and macroeconomic factors that shape and influence markets dynamics for real
property particularly in the Philippines. It also covers a wide range of topics including real estate
values, real estate trends, real estate ownership, real estate finance, taxation and investment. To
ensure the course objectives would be achieved, aneed for a teaching resource material is necessary.
Thus, this worktext has been prepared.
This worktext is intended for use by students of AB Economics program taking up the subject
Econ 127 with the objective of providing them with a comprehensive understanding about real
estate economics. Likewise, it has been designed as an instrument for learning development and
assessment, providing students with a practical approach to applying the knowledge learned in
the lectures. Each worktext covers exercises that is built upon the lessons of all the chapters with
the following course outcomes:
1. Know the fundamental concepts of real estate and real estate economics.
2. Examine how the real estate market works.
3. Determine the different characteristics and types of real properties.
4. Analyze the various determinants affecting real estate demand.
5. Distinguish between new construction and existing stock in the supply of real estate.
6. Assess the current trends of real estate sector in the Philippines and comprehend how real
estate affects Philippine economy.
7. Describe trends in real estate values and analyze national and local level economic events to
interpret their effect on real estate markets.
8. Understand economic aspects and concepts of land use.
9. Analyze the principles real estate and property taxation.
10. Appreciate the vital role of real estate investments in the economy
11. Comprehend the process of valuing real property.
12. Learn the impact of availability of money and financing on housing and real estate.
Bear in mind that it takes sustained effort – and some dedicated patience – to study and learn
the subject. But, it is assured that the effort is well worth it. It is hoped this modest work helps you.
So, the best of luck as you begin your journey in answering the worktext exercises�

1 Introduction to Real Estate Economics
4 Real Estate Market
9 Real Property
14 Real Estate Demand
18 Real Estate Supply
21 Philippine Real Estate Market
24 Real Estate Ownership
28 Real Estate Development
31 Real Property Taxation
35 Real Estate Investment
28 Real Estate Appraisal
31 Real Estate Finance
CONTENTPAGE
TABLE OF CONTENTS

1
WORKTEXT 1 : Introduction to Real Estate Economics Econ 127 – Real Estate Economics
www.jamesonestrada.com
EXERCISE 1
Modified True or False. Write T in the blank if the statement is
correct. If not, underline the word or phrase that makes it false and
write on the blank the correction.
1. Real estate economics studies how people & how their
actions affect cultural values. _____________
2. Economic theories and models are developed to help
people think through the complicated dynamics of real
estate property, value and exchange. _____________
3. Rent is a resource payment for land. _____________
4. Renewable resources have a fixed supply that is
depleted as the resource is consumed. _____________
5. The quantity of land or real estate used is determined in
the labor market. _____________
6. The total amount of land is fixed so changes in the price
of land may change the quantity supplied of land.
_____________
7. Real estate is land plus permanent human-made
additions. _____________
8. Surface rights are the rights to natural resources lying
below the earth surface. _____________
9. A real estate owner may transfer surface rights without
transferring subsurface rights. _____________
10. A tree remains real property even if it is cut into lumber.
_____________
11. Automobiles, boats, computers and office equipment are
all examples of real property. _____________
12. A fixture is an item of real property that has been changed
into personal property as a result of permanent
attachment to the personal property. _____________
EXERCISE 2
Multiple Choice. Encircle the one alternative that best completes
the statement or answers the question.
13. Which is true about real estate?
A. Land consisting of personal properties
B. Items which are movable and part of the land.
C. Transfer of property and possessions of land.
D. Property consisting of land and the buildings attached to it
E. Private property that is movable.
14. Which of the following is not a unique characteristic of a real
estate market?
A. durability B. mobility
C. high transaction costs D. heterogeneous
E. long time delays
15. Which of these is a facilitator in the real estate market?
A. Developer B. Renter
C. Renovator D. Real estate broker
E. Real estate investor
16. The opportunity costs of land is largely determined by
A. need. B. demand.
C. real estate agents. D. developers.
E. government.
17. The "bundle of legal rights" is properly included in the
definition of
A. land. B. trade fixtures.
C. real estate transactions. D. real estate.
E. real property.
18. Which of the following is not considered personal property?
A. Car B. Air conditioner
C. Chandeliers D. Building
E. Furniture
19. All of the following are properly described by the word
"improvement" except
A. streets. B. a sanitary sewer system.
C. trade fixtures. D. amenities.
E. the foundation of a building.
20. Real property can become personal property by
A. severance. B. purchase.
C. conversion. D. attachment.
E. accession.
Republic of the Philippines
Lingayen Campus
WORKTEXT 1 : INTRODUCTION TO REAL ESTATE ECONOMICS
Econ 127 – Real Estate Economics
NAME: _______________________________________ SCORE: ___________________________________
YEAR AND COURSE: ___________________________ DATE: ____________________________________

21. The bundle of legal rights includes all of these rights except
A. enjoy the property within the framework of the law.
B. sell or otherwise convey the property.
C. use the property for any purpose, legal or otherwise.
D. possess the property.
E. none of these.
22. The term land may not refer not just to the surface of the earth
but also to
A. underlying soil. B. buildings.
C. fixtures attached to the land. D. the bundle of legal rights.
E. improvements.
23. A real estate buyer bought a parcel of land and sold the mineral
rights to an oil company. The buyer gave up which of the following?
A. Surface rights B. Subsurface rights
C. Occupancy rights D. Water rights
E. Air rights
24. Mr. Dela Cruz is interested in a house that fits most of his
needs, but is it located in a busy area where he is not sure he
wants to live. His concern about the property’s location is called
A. immobility. B. land scarcity.
C. area preference. D. physical deterioration.
E. permanence of investment.
25. While moving into a newly purchased home, Reyes family
discovered that the seller has taken the ceiling that hung over the
dining room table. The seller had not indicated that the ceiling fans
would be removed, and the contract did not address this issue.
Which of these statements is correct?
A. The ceiling fan belongs to the seller.
B. Ceiling fans are considered trade fixtures.
C. Ceiling fans are considered personal property.
D. Ceiling fans are considered normally to real estate.
E. None of these.
26. Rights or privileges which are connected with real property, are
A. improvements B. appurtenances
C. trade fixtures D. accession
E. restricted to air and water rights
27. All of the following will be considered real estate except
A. farmland. B. fences.
C. farmhouse. D. growing trees.
E. farm equipment.
28. A rancher owns a parcel of land on which oil is discovered. If
the rancher has not previously conveyed the oil rights, who owns
the oil?
A. The rancher B. The bank
C. The government D. The developer
E. The tenant to whom the property has been leased
29. All of the following are economic characteristics of land except
A. scarcity. B. improvements.
C. area preference. D. uniqueness.
E. permanence of investment.
30. Generally, personal property can be distinguished from real
property by its
A. greater variety. B. mobility.
C. cost. D. multiplicity of use.
E. supply.
EXERCISE 3
Classification. Determine what category of resources does each
of the following belong when a real estate developer constructs a
real property? Write LD for land, LR for labor, CL for capital and
EP for entrepreneurship.
31. ___________ Real estate broker
32. ___________ Appraiser
33. ___________ Cement and bricks
34. ___________ Cranes
35. ___________ Heavy-duty trucks
36. ___________ Civil engineer
37. ___________ Bulldozers
38. ___________ Water system
39. ___________ Construction site
40. ___________ Construction workers
41. ___________ Hydraulic hammers
42. ___________ Architect
43. ___________ Property manager
44. ___________ Trencher
45. ___________ Professional surveyor
EXERCISE 4
Determine whether each of the following cases on real estate
economics is a concern of microeconomics or macroeconomics.
Write MI for micro and MA for macro.
46. The percentage contribution of real estate segment in
the increase of GDP ___________
47. Mr. Cruz’s decision whether to rent an apartment or buy
a housing unit ___________
48. The determinants that affect the supply of retail spaces
in SM Malls ___________
49. Occurrence of real estate bubble in recent years
___________
50. The views of developers about the prospects for the real
estate market in the coming year ___________
51. The growth of real estate loans (RELs) by 30 % percent
which is equivalent to 4 percent of GDP ___________

52. The demand for global real estate markets mirroring the
uneven pace of global growth ___________
53. The surge in construction and real estate activities that
reflects higher demand for office spaces and residential
condominiums, and house and lots ___________
54. The rapid increases in valuations of real estate properties
___________
55. The effect of low interest rates in driving real estate
lending. ___________
56. The demand for mid-range residential properties
___________
57. The reason why high-end/luxury properties are largely
purchased for investment, with the purpose of renting out
the unit to the expatriate market ___________
58. The impact of OFW remittances and the fast-growing
BPO sector in real estate industry ___________
59. The price to be charged for a three-night stay in a
luxurious resort ___________
60. The factors involved why rent-controlled apartments are
less well maintained than unregulated units?
___________
EXERCISE 5
To which category of natural resources does each of the following
belong? Write RR for renewable resources and NR for
nonrenewable resources.
61. Coal ___________
62. Natural gas ___________
63. Biomass ___________
64. Copper ___________
65. Diesel ___________
66. Gold ___________
67. Solar radiation ___________
68. Tides ___________
69. Agricultural products ___________
70. Geothermal ___________
EXERCISE 6
To which category of properties does each of the following
belong? Write P for personal property and R for real property
71. Home appliances ___________
72. Vacant land ___________
73. Computer ___________
74. Buildings ___________
75. Chairs and tables ___________
76. Patents ___________
77. Furniture ___________
78. Automobiles ___________
79. Stocks ___________
80. Jewelries ___________
81. Sidewalks ___________
82. Single-family dwelling ___________
83. Vacant land ___________
84. Car ___________
85. House and lot ___________

WORKTEXT 2 : Real Estate Market Econ 127 – Real Estate Economics
EXERCISE 1
True or False. Determine whether each of the following
statements is true or false. Write the answer on the blank after the
number.
1. The real estate market is the economic market that
involves the buying and selling of real properties.
____________
2. For a real estate market to be competitive, there must be
more than a single real estate buyer or developer.
____________
3. A renter is a pure real estate investor in the real estate
market. ____________
4. Developers do the purchase, ownership, management,
rental and/or sale of real estate for profit. ____________
5. Real estate supply is fixed in the short run.
____________
6. A market is a monopoly if the government is the only
buyer of a particular real property. ____________
7. Number of buyers or sellers for a particular class of
property is usually limited. ____________
8. Because real estate can be durable, sales in most
markets tend to consist primarily of existing stock rather
than new builds. ____________
9. Each property has a different location that is permanently
fixed. ____________
10. Like any business sector real estate is susceptible to the
economic forces of supply and demand. ____________
11. The property can be purchased either as an investment
with the expectation of earning returns or as a
consumption good with the thought of using it.
____________
12. Banks and other financial institutions are considered
facilitator of the real estate market. ____________
EXERCISE 2
Identification. Identify who is the participant in the real estate
market described in each of the items below.
13. A commercial bank offering loans to construction firms
___________
14. An OFW who buys a new home ___________
15. A BPO company who rents an office building
___________
16. A company who prepares raw land for building
___________
17. A person is both owner as well as tenant ___________
18. A company who supplies refurbished buildings
___________
19. A real estate broker selling real property ___________
20. An appraiser who sets a value of the real property
___________
21. A firm who improves land for use by adding or replacing
buildings ___________
22. A company who improves the structure of a real estate
property ___________
EXERCISE 3
Determine whether each of these statements describes or
characterizes a real estate market. If yes, write Y, if not, write N.
23. There is no central market for property. ___________
24. If real estate demand suddenly increases, existing
supply may not be enough to meet it. ___________
25. Properties are homogenous they are physically and
geographically different. ___________
Lingayen Campus
WORKTEXT 2 : REAL ESTATE MARKET
NAME: _______________________________________ SCORE: ___________________________________

WORKTEXT 2 : Real Estate Market Econ 127 – Real Estate Economics
26. Prices of properties are relatively cheap. ___________
27. Investors are more likely to buy a property if the
income/cash flow from it exceeds the debt service.
___________
28. Number of buyers and sellers of real estate is reasonably
large in comparison to other commodities. ___________
29. Knowledge of real estate buyer and seller is frequently
poor due to complexity of legal requirements needed to
transfer ownership. ___________
30. Real estate buyers and sellers have enough and
complete information on transaction prices. __________
31. Properties are bulky and durable. ___________
32. Supply and demand for a certain type of property in a
certain location are always in equilibrium. ___________
EXERCISE 4
Determine whether the following cases is a real estate market for
residential, commercial, agricultural and industrial. Write R for
residential, C for commercial, A for agricultural and I for industrial.
33. Amaia Land sold 200 units of single family dwellings.
_____________
34. Robinsons Malls offer 1.2 million square meters of gross
leasable area for retail spaces. _____________
35. Ayala Land launched 23,487 residential units in
economic and socialized housing segments last 2012.
_____________
36. A developer expects to sell 50 units of new townhouses
in Rizal. _____________
37. Century Properties built and sold 400 luxury condo with
fully-furnished units. _____________
38. Some BPO companies relocate to Makati Central
Business District and lease office buildings.
_____________
39. A 20-hectare farmland in Davao is purchased by Del
Monte to plant pineapples.
40. Many FMCG companies lease warehouse buildings in
Laguna for storage of consumer goods. _____________
41. Two industrial parks are built in Calabarzon area to cater
the needs of manufacturing companies moved out of
China. _____________
42. Hotel developers built 10,000 new rooms to serve the
growing hotel market for international tourist arrivals.
_____________
EXERCISE 5
Determine whether the following cases is a real estate market for
primary sale, secondary sale, rental property, auction property,
real investment trust.
43. A developer sold 25 new condominium units in Global
City. ____________
44. Five newly built office buildings by Century Properties in
Makati City are for lease. ____________
45. SM Malls adds extra retail spaces for incoming tenants.
____________
46. A home owner in a subdivision sold his house and lot for
P2 million. ____________
47. Apartment owners increase the monthly rents for their
tenants. ____________
48. The government goes through a process of bidding to
sell an office building. ____________
49. Three more real estate investment trusts are listed on
the Philippine stock exchange representing a range of
property sectors including retail, office and residential.
____________
50. A commercial building owned by a bank is sold to a
businessman for 8 million. ____________
EXERCISE 6
Identify what phase of real estate cycle is observed in the
following. Write RN for recession, RY for recovery and EX for
expansion.
51. Increased vacancies of rental properties ____________
52. Sales activity is very slow, while prices and rents
continue to decline. ____________
53. Vacancy rate begins to approach equilibrium, where
supply equals demand. ____________
54. The time it takes for a property to sell after being listed
for sale reduces markedly. ____________
55. Almost no new construction occurs. ____________
56. Property prices begin to increase. ____________
57. Rents rise rapidly toward new construction levels, and
prices continue to increase. ____________
58. The length of time to sell a property increases markedly.
____________
59. Reduced cash flow for real estate investors.
____________
60. Construction activities increase dramatically, but
vacancy rates remain at normal levels or lower.
____________

WORKTEXT 3 : Real Property Econ 127 – Real Estate Economics
EXERCISE 1
Identification. Identify the following. Write the answer in the blank
after the question.
1. This refers to land and things permanently attached to it.
________________
2. These are properties intended to generate a profit, either
from capital gain or rental income. ________________
3. A real estate property designed for industrial use, such
as distribution, manufacturing or warehouse facilities.
________________
4. A residential property usually occupied by just one
household or family, and consists of just one dwelling unit
or suite. ________________
5. A self-contained housing unit (a type of residential real
estate that occupies only part of a building.
________________
6. A number of single or multi-unit buildings in a continuous
row with shared walls and no intervening space.
________________
7. A property unit which is individually owned and has joint
ownership with other individuals of various common
areas of the property. ________________
8. A dwelling having apartments with separate entrances for
two families. ________________
9. A residential property which can be (might not in practice
be) movable on wheels. ________________
10. This property comprises of single construction taken by
single or multiple tenants and exclusively meant for retail
use. ________________
11. A commercial establishment which is used for relaxation
or recreation, attracting visitors for holidays or vacations.
________________
12. A land or an existing structure to be demolished for the
purpose of new construction to the highest and best use
of property. ________________
.
EXERCISE 2
13. All of the following are categories of the uses of real property
except
A. commercial. B. developmental.
C. agricultural. D. industrial.
E. residential.
14. A broker sells a two-story house having a complete apartment
on each floor and also side-by-side apartments on a single lot that
share a common wall. The broker sells what type of property?
A. condominium B. duplex
C. condominium D. resort
E. apartment
15. Leasing of shopping malls like SM and Robinsons Malls
comprise 30 percent of the Philippine property market
composition. What is being leased mostly in shopping malls?
A. office spaces B. hotels
C. industrial lots D. retail spaces
E. supermarkets
16. The type of housing which can become permanent if affixed
to the land is called
A. on-site built B. duplex
C. manufactured D. multi-family
E. semi-detached single family
17. A real estate development in a residential area where the
land is divided into lots with houses constructed on each lot.
A. Neighborhood B. Townhouse
C. Subdivision D. Industrial park
E. Zoning
18. Which of these is a commercial real estate property?
A. Duplex B. Condominium
C. Townhouse D. Warehouse
E. Shopping mall
19. Among the five main segments of the Philippine real estate
market, which accounts for the biggest share of total revenues?
A. Shopping malls B. Industrial lots
C. Agricultural lands D. office spaces
E. Residential properties
20. Which of the following metric units is primarily used in the
measurement of real estate spaces?
A. hectare B. acre
C. square meter D. square mile
E. kilometer
Lingayen Campus
WORKTEXT 4 : REAL PROPERTY
NAME: _______________________________________ SCORE: ___________________________________

EXERCISE 3
Classification. Identify what characteristic of real estate
properties must be considered in the following.
21. The buildings can last for many years while the land it
stands on is indestructible. ______________
22. All buildings are different in terms of the location they are
situated in, their structure and design as well as how they
are financed. ______________
23. Because real estate is locationally steady, there can be
no physical market place. ______________
24. Real estate properties entail costs including search costs,
real estate fees, moving costs, legal fees, land transfer
taxes, etc. ______________
25. The availability of land in a given location or of a particular
quality is limited. ______________
26. Construction lags exist that prevent speedy adjustment
of real estate supply to demand and price changes.
______________
27. Real estate is subject to time delays due to the length of
time it takes to finance, design, and construct new supply.
______________
28. Building an improvement on one parcel of land can affect
the land’s value. ______________
29. Supply is composed of a large share of already pre-
existing stock and a tiny percentage of new development.
______________
30. Real estate can be purchased with the expectation of
attaining a return or with the intention of using it or both.
______________
EXERCISE 4
Classification. To which category of properties does each of the
following belong? Write PR for private property and PU for public
property.
31. Natural park ______________
32. Farmhouse ______________
33. Central bank building ______________
34. Hotel and resort ______________
35. GOCC buildings ______________
36. Internet cafe shops ______________
37. Commercial buildings ______________
38. Residential house and lot ______________
39. Shopping centers ______________
40. Economic zone industrial parks ______________
EXERCISE 5
Classification. Identify whether the following real estate
properties is classified as Residential, Commercial, Industrial and
Agricultural. Write the answer on the space provided for.
41. Office buildings ______________
42. Subdivision ______________
43. Shopping malls ______________
44. Hotels ______________
45. Restaurant ______________
46. Farms ______________
47. Banks ______________
48. Apartments ______________
49. Duplex ______________
50. Factories ______________
51. Barn ______________
52. Development sites ______________
53. Distribution centers ______________
54. Greenhouse ______________
55. Supermarkets ______________
EXERCISE 6
Matching Type. Match each real estate brands with the
corresponding real estate category by placing the appropriate
letter before the number
56. Shoe Mart (SM) A. Condominium
57. Don Palmas B. Land development
58. Gerry’s Grill C. Restaurant
59. Puregold D. Industrial site
60. PBcom Tower E. Residential homes
61. Serendra F. Office buildings
62. Ayala Land G. Hotel
63. Technopark H. Resort
64. Crown Regency I. Supermarket
65. Camella homes J. Shopping Mall

EXERCISE 7
Identification. Identify what real estate property is depicted in the
following illustrations. Write the answer on the blank provided.
66. 67.
________________ ________________
68. 70.
________________ ________________
69. 71.
________________ ________________
72. 73.
________________ ________________
74. W 75.
________________ ________________
76. 77.
________________ ________________
78. 79.
________________ ________________
80. 81.
________________ ________________
82. 83.
________________ ________________
84. 85.
________________ ________________

WORKTEXT 4: Real Estate Demand Econ 127 – Real Estate Economics
EXERCISE 1
True or False. Determine whether each of the following
statements is true or false. Write the answer on the blank after the
number.
1. Demand is effective if it is backed up by purchasing
power. ____________
2. A decrease in demand causes an increase in vacancies
in offices, retail stores, apartments, or a large number of
unsold homes. ____________
3. The change in rent or change in price is an exogenous
determinant of demand for real estate. ____________
4. Increases in real income or wealth is associated with
increases in the number of housing units and the square
footage of retail space demanded. ____________
5. For a given level of single-family housing prices,
increases in apartment rents are likely to induce a shift of
the demand curve for single family-housing to the right.
____________
6. In the office market, as rents in the class A market rise
some firms may be forced to seek space in the class B
market where rents are more affordable. ____________
7. Increase in vacancies causes a decline in rents anti
prices. ____________
8. An increase in demand will reduce the number of existing
real estate vacancies. ____________
9. As local home prices drop, the quantity of homes
demanded also declines. ____________
10. Demand for real estate is relatively elastic, because the
quantity demanded doesn't change much as prices
change. ____________
11. In the case of office space the most relevant market-size
variable is office employment. ____________
12. Developers and investors would always prefer to face
inelastic project demands because if prices/rents
increase, revenues increase as well. ____________
EXERCISE 2
13. Family A wants a Php1.5 M house but cannot afford it. Family B
wants the same house and can afford it, but does not want to make
the necessary high monthly payments. Family C wants the house,
can afford it, and will make the high monthly payments. Which
Family creates or causes an effective demand for the house?
A. Family A B. Family B
C. Family C D. Family A and B
E. Family A, B and C.
14. All of the following determinants would induce real estate
demand except
A. population. B. prices /rents expectation.
C. advertisement D. fiscal policy.
E. wealth
15. Tenants come to expect that the rent per square meter for
retail space in a shopping mall will increase by 20% next month.
What’s the effect on the demand for retail space?
A. This month’s demand rises B. This month’s demand falls
C. Next month’s demand rises D. This month’s supply falls
E. Next month’s demand will not change
16. For most real estate buyers, the decision of whether to make
a major purchase is a test of
A. consumer satisfaction. B. physical strength.
C. employment suitability. D. government regulation.
E. credit availability.
17. Which factor is most likely to influence demand for real
estate?
A. Number of real estate brokers in the area
B. Number of full-time real estate salespeople in the area
C. Wage levels and employment opportunities
D. Price of new homes being built in the area
E. The number of real estate vacancies.
18. Which of the following will shift the demand curve for real
estate to the right?
A. the rent for an apartment unit increases
B. the rent for a retail space decreases
C. the price of real estate substitute increases
D. the income of a buyer goes down
E. the price of a condo unit is expected to fall next month
Lingayen Campus
WORKTEXT 4 : REAL ESTATE DEMAND
NAME: _______________________________________ SCORE: ___________________________________

19. A major car manufacturer announces that it will relocate one
of its factories, along with 2000 employees, to a small town. What
effect will this announcement most likely have on the small town's
housing market?
A. Houses will likely become less expensive as a result of the
announcement
B. Houses will likely become more expensive as a result of the
announcement
C. Because the announcement involves an issue of
demographics, not of supply and demand, housing prices will stay
the same.
D. The announcement involves an industrial property; residential
housing will not be affected.
E. None of these.
20. The price elasticity of demand for housing services in a
particular region is estimated to be negative 0.7. This implies that
real estate demand is
A. elastic. B. inelastic.
C. unitary. D. perfectly elastic.
E. perfectly inelastic.
21. A decrease in demand will cause an increase in vacancies in
real estate properties. Eventually, an increase in vacancies will
cause
A. rents and prices to decline. B. rents and prices to rise.
C. more real properties to erect. D. real estate supply to rise.
E. real estate business to shut down.
22. Real estate suitable for condominium development is also
suitable for single-family home development. Therefore, a rise in
the price of condominiums relative to single-family homes tends to
A. increase the cost of building new single-family homes.
B. reduce the demand for condominiums.
C. increase the demand for condominiums.
D. decrease the demand for single family homes
D. None of the above.
23. What type of real estate property is in-demand for BPO sector?
A. retail space C. office space
C. industrial space D. residential space
E. subdivision
24. All other things being constant, if population increases and
mortgage interest rates decline
A. office rents should decline.
B. the economy should be heading for a recession.
C. more renters should starts to buy homes.
D. resale of existing homes should be done.
E. lenders tighten up on construction credit.
25. Real estate managers of ABC Land are talking in a conference
room during a cycle meeting. Which of these quotations refers to
a movement along the real estate demand curve?
A. “Our new line-up of luxury condo units would surely help us
to surpass our sales last year”
B. “Since our competitors raised their prices our sales have
doubled”
C. “The decrease in demand for housing has greatly affected our
sales this month”
D. “When we decided to cut the prices of our condo units, an
increase in our sales has been remarkable”
E. “It has been an unusually Christmas season, our real estate
sales are down from last year”
EXERCISE 3
Real Estate Demand Analysis. Think about and consider the
demand for three notable residential development firms: Camella
Land, Avida Land, and Amaia Land. Explain the effect of the
following events on the real estate demand for housing units of
Camella Land and the quantity of houses demanded, ceteris
paribus. Indicate what variable causes the change and illustrate
through graph the change.
26. The number of families who wish to buy residential
property units increases. ____________
27. As the wage levels of overseas workers go up many are
willing and able to buy residential homes. ___________
28. The price of residential units offered by Amaia Land falls
markedly which is 20% lower than that of Camella.
____________
29. The consumers become interested to own a house
because their incomes increase considerably.
____________
30. Due to increase in apartment rents, families tend to
consider buying a residential property. ____________
31. Government implements a rent control (price ceiling)
that increases the demand for renting apartments.
____________
32. Developers anticipate the home prices to rise rapidly in
the near future. ____________
33. The low interest rates in real estate lending drive people
to demand for residential properties. ____________
34. It is alleged that some newly built Camella land homes
have structural failure. ____________
35. A new residential development brand named JNE Land
is introduced to the real estate market. ____________
36. The prices of top of the line home units of Camella land
fall. ____________
37. Avida Land offers an attractive housing promo wherein
a buyer can have free entertainment and kitchen
appliances upon purchase of a new residential unit.
____________
38. Many families prefer the amenities and services
provided by Camella Land to the home buyers.
____________
39. Camella launches mass advertising campaigns in print
ads and TV to promote the unique selling points of the
brand. ____________
40. Home buyers expect the price of Camella Land’s
properties to rise soon. ____________

EXERCISE 4
Real Estate Demand Analysis. Given the options below, choose
the appropriate letter that corresponds to the effect on demand for
real estate. Based on the chosen letter; indicate what variable or
determinant of demand affects the change and show through
graph the change of the demand curve.
41. The price of a top of the line condominium unit in
Rockwell Land was reduced by 25%.
_____________________
42. The demand for commercial buildings for lease in Makati
continues to grow because of the increase in
multinational corporations applying for lease.
_____________________
43. There is a 2% increase in population in Metro Manila
thus demand for residential properties go up.
_____________________
44. An increase in the rents of apartments (a substitute) in a
certain residential area caused Villanueva Family to own
a single-family home instead. _____________________
45. Many prefer to own a new 10-hectare residential area in
Global City because of the luxurious amenities and
accessibility to major business districts, schools and
establishments. _____________________
46. A new real estate developer named Camella Land
introduced its residential and housing projects with full-
blast media advertisements. _____________________
47. The price of a lot (a complement) per square meter in
Happy Residences has increased by 20%. Thus the
demand for housing units in HR declined.
_____________________
48. Due to increase in their income, many sales managers
have availed condo units in the Grand Midori, a twin-
tower luxury condo in Makati City.
_____________________
49. Pepito Manaloto luckily won in a lottery. Eventually, he
purchased a house and lot in GMA Village and afford to
buy the Empire East commercial building in Bonifacio
Global City. _____________________
50. Makati Central Business District expects to have an
additional 336,000 square meters of office spaces in
2013 because of growing demand form country’s
business process outsourcing (BPO).
_____________________
51. With the decline in profit and income of tenants renting
business spaces in SM Rosales, some of them have
downsized the retail spaces they rented in an attempt to
cut costs. _____________________
52. Amaia Land, a new real estate developer, increased the
pricing of its offered housing projects in Laguna.
_____________________
53. A luxury condo with fully-furnished units that are ready
for occupancy is selling by Vista Land at a price of 5M.
On one hand, a related luxury condo is being offered at
4M by Ayala Land with a decreased price of 1M (Less
20%). _____________________
54. A real estate broker anticipates the price of a house and
lot in Rizal (1600 sq. ft) to fall next month from 2M to
1.5M. _____________________
55. People expect that apartment rents in L&S Subdivision
will increase next month. _____________________
EXERCISE 5
A. Classification. Determine whether the following real estate
properties is elastic or inelastic and normal or inferior.
56. Luxury condominium unit ___________
57. Middle-income housing ___________
58. Deluxe hotels ___________
59. Low-priced inns ___________
60. Low-rent retail space ___________
B. Classification. Determine whether the following real estate
properties is a substitute or a complement. Write S for substitutes
and C for complements after each number.
61. Hotel and inn ___________
62. House and lot (land) ___________
63. Renting an apartment and owning a house __________
64. Townhouses and condominiums ___________
65. Duplex and single dwelling ___________

EXERCISE 6
Problem Analysis. Analyze and answer what is required in the
following problems.
A. Suppose the demand for retail spaces in a particular shopping
mall is described by the following demand schedule.
66. Describe the relationship between the two variables.
67. Derive the demand for retail spaces.
68. Graph the demand schedule.
B. Suppose the market demand for housing units in Metro Manila
is described by the schedule below, expressed as = − .
Price No. of Housing Units
Demanded
600,000 900
500,000 850
400,000 800
300,000 750
200,000 700
69. Describe the relationship between the price and the
number of housing units demanded.
70. Using the information in the demand schedule above,
derive the demand equation for housing units.
71. Now assume that due to rising incomes, home buyers in
Metro Manila are now able to own a new housing unit
thus demand increases. If at each of the prices on the
original demand schedule, the home unit demanded is 50
units higher that it was previously, what is the new
demand schedule and new demand equation? Graph the
original and new demand curve.
C. A landlord in a certain city w/ a two-story apartment
implemented a decrease in the housing rental from P7,000 to
P5,000 a month. This resulted to an increase in the apartment
units demanded from 100 to 120.
72. Solve for the price elasticity of demand of the apartment
property.
73. Interpret the computed value.
74. Derive the demand equation of the real estate property
in the form = – .
75. Graph the curve using the derived demand equation.
Year Rent (per square
meter)
Retail Space
Demanded
2010 2,000 400
2011 3,000 380
2012 4,000 360
2013 5,000 340
2014 6,000 320

REFERENCES
Brueggeman, William and Fisher, Jeffrey. Real Estate Finance and Investments
14th Edition. Mc-Graw-Hill Companies, Inc., USA. 2011
Conti, Peter. Commercial Real Estate Investing for Dummies. Wiley Publishing,
Inc. Indiana, USA. 2008
Eldred, Gary. Investing in Real Estate, 6th Edition. John Wiley and Sons, Inc. New
Jersey, USA. 2009.
Ong, E. Winning in Real Estate, 1st ed., Worldlink Realty and Management
Company, 1991.
Mckenzie, Dennis, et al. Essentials of Real Estate Economics. Cengage Learning.
Mason, USA. 2012.
McMahan, John. The Handbook of Commercial Real Estate Investing. Mc-Graw-
Hill Companies, Inc., USA. 2006.
Myers, Danny, Construction Economics A New Approach, 2nd Edition. Taylor and
Francis Group, New York City, USA, 2008.
Shenkel, W. Modern Real Estate Principles, Revised ed., Texas, Business
Publication Inc., 1980.

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