AN APPRECIATION OF THE ECONOMIC BASIS OF PROPERTY VALUES

For an object to have value it must be scarce in

relative to demand, i.e. it has to be limited in supply relative to its demand,

this also applies to the case of properties. If an item is in high supply and

there is limited demand for it, then ion an economic sense that object has no

value. For example, air is useful for many purposes because it is in free

supply, it has no economic value.

Apart from being a measure of the relationship

between supply and demand of commodities, value also measure the usefulness and

scarcity of a commodity in relation to other commodities. Human wants, as

generally believed, are limited and the resources to satisfy these wants are

scarce. This fact prompts the need for choice among the numerous wants and the

relative values attached to such wants will be a reflection of the choice made.

Example, if a man wants one commodity more than the other, he will place

greater value on the one he wants. Should there be a change in the level of

want of a commodity and the resources devoted to satisfy the want so will the

relative value of commodities change. In this case, price will be a measure of

these relative values in money terms.

In Economics, we learnt that increase in price will

lead to increase in demand because some people will prefer to buy substitute

commodities rather than pay higher the price. Conversely, increase in price

will lead to increase in supply because the producer will want to maximize

profit. However, at a point, a level is reached where, theoretically, supply

equals demand. At this point, “market price” of a commodity tends to its cost

of production or replacement. This behavior is also applicable to the landed

property market whether; Commercial, Residential, Agricultural, Industrial,

Educational, etc.

Example:

Below is a table showing the demand and supply

levels and the prevailing prices of two-bedroom flats over a given period in

Abuja Metropolis.

PRICE

PER UNIT

DEMAND

SUPPLY

N100,000.00

50

10

N200,000.00

40

20

N300,000.00

30

30

N400,000.00

20

40

N500,000.00

10

50

From the Table above, it can be deduced that N300,000.00

is the equilibrium price and the equilibrium quantity is 30 housing units.