Land Economics Chapter 1 - Woldla University PDF

. WOLDIA UNIVERISTY SCHOOL OF LAND ADMINSTRATION Department of Land Administration and Surveying Course Title: Land Economics By: Melesech Fekade(MSc) 0ctober , 2024  Course objectifies At the end of this course...

. WOLDIA UNIVERISTY SCHOOL OF LAND ADMINSTRATION Department of Land Administration and Surveying Course Title: Land Economics By: Melesech Fekade(MSc) 0ctober , 2024  Course objectifies At the end of this course the students will be able to understand :  Understand the nature of land as an asset and its role in the national economy;  Understand different theories on the supply of land: land rent and land values.  Identify the factors that can affect the value of the land;  Analyze the role of government in the land market and in land use regulations; and  Analyze the supply and demand situation of land in the Ethiopian context. UNIT ONE: INTRODUCTION  Basic terms need to understand  Before going to the detail of the course the following term need to understand  Land: it is the ultimate resource , for without it life on earth cannot be sustained.  It is essential for present and future generations. When poorly managed, it leads to:  disputes,  conflict,  degradation and other problems, all of them drivers of slum development and poverty.  Basic terms need to understand  Land is not just a commodity that can be traded in the market.  It represents multiple values which should be protected by both policy and law  An economic resource that should be managed productively  A significant resource for equitable access of livelihood  A finite resource which should be utilized sustainably  A cultural heritage which should be conserved for future generations  Has social, cultural and religious significance for individuals, families and communities  Basic terms need to understand  Land comprises all naturally occurring resources as well as geographic land or it is is simply the space to human activity  It is also a scarce resources. Land is both a physical commodity and an abstract concept in that the bundle of rights to own or use it (own, use, transfer, mortgage )  Land is also a major source of wealth,  Real estate: the physical land and permanently attached improvements (weather natural or man made) on it. Example: land, buildings, house, fences, bridges, water, crop, trees, and minerals  Cont.…  Economics: it is a social since which studies about efficient allocation of a scarce (limited) resource in order to maximize the satisfaction of (so as to attain the maximum fulfilment of) unlimited human needs.  Rational of economics 1. Human (society) material wants are unlimited but, 2. Economic resources are limited (land, labor, capital, and technology or entrepreneurship) For example: we have 200 m2 land supply, and there is five residents need to build house that is demand side. However the supply of land can not satisfy the people for their interest of housing. So how to use this limited land supply effectively to satisfy the interest of those people?  Those are two main conflicting issues and in order to resolve this conflicting issues we need a science that is economics  So economics is a science that tries to reconcile these two opposite things or conflicting issues.  Cont.…  The field and scope of economics is expanding rapidly (financial, agricultural, energy, developmental economics, real estate economics, and others). It is multidisciplinary and necessary for  How ever the core modern economics is formed by two major branches: microeconomics and macroeconomics Microeconomics: studies individual unit of economy. It may be individual Person , organization or company, commodity or product. E.g. The study of potato production and price Macroeconomics: studies aggregate of the economy. Studies about multiple things by aggregating in general. E.g. the study of general vegetable production and price in one country  1.1. Definition and concept of Land Economics  it is the application of economic techniques to land markets. It tries to describe, explain, and predict patterns of, supply, prices, and demand of land.  It is a branch of the economics field which focuses on the use of land, allocation of land resources and the role of land in economics.  The primary purpose of land economics is to explain and predict patterns of prices by applying supply and demand. Supply and demand is the core principle and foundation of modern economics.  Demand and supply  Demand refers to how much of a product or service is wanted by buyers. Supply represents how much the market can offer.  Low supply and high demand increase prices. In contrast, the greater the supply and the lower the demand, the prices tend to fall.  Land markets usually adjust very slowly compared to other markets. It could take weeks, months, or longer, even if it does not change.  Cont.…  It is a branch of economics which deals with all those forces that affect the demand and supply of land as a resource and as a factor of production - i.e. those forces which influence optimum allocation of the resource land during the production process of consumer goods and services.  Land economics can be defined as the economic relationship between land and man (every economic activity is on the land )  So we can say that, land economics is the application of the principles and theory of economics to the problem relating to the use of land(since land is scarce or limited resource)  Bundle of Rights for a Real Estate Owner These are the recognized rights of the holder of title to the property and include:  The right of possession - the property is owned by whomever holds title;  The right of control - within the laws, the owner controls the use of the property;  The right of exclusion - others can be excluded from using or entering the property;  The right of disposition - the title holder can sell, rent or transfer ownership or use of the property at will  Factor of production So we can bring on product with the integration of those factor of production Including All human resources  Factor of production Land: The land itself and all natural resources like coal, iron oil, and others. Capital: tools, money, machines, and structures used in production Labor: the physical and mental efforts of workers Enterprise: which brings all the previous resources together for production like; skill or knowledge that can change to product, Enovation, others  Factor of production Production function  Production function is given by Y = F(K, L, La,…….)  It shows how much output (Y) the economy can produce from K units of capital, L units of labor, La amount of land and other inputs  It reflects the economy’s level of technology  Characteristics of land as a factor of production  Land is primary input and factor of production which is not consumed but without which no production is possible.  The “land” includes all physical elements in the wealth of a nation given by nature; such as climate, environment, fields, forests, minerals, mountains, lakes, streams, seas, and animals.  As an asset, it includes anything on the ground (such as building, crops, fences, trees, water), above the ground (air and space rights), under the ground (mineral rights).  As collateral, land is very attractive to lenders because it cannot be destroyed, moved, stolen, or wasted.  Land is needed for all production — and its supply is fixed.  Economic characteristics of Land  Land also has some distinct economic characteristics that influence its value as an investment.  Scarcity: while land is not considered rare, the total supply is fixed or limited. But the right know the number of user is high and will increase in the future.  Capital intensive nature: high expenditures or huge capital needed for land purchase and construction of a building  Improvements: any addition or change to the land or a building (to the land or on the land) that affect the property value is called improvement.  Permanence of investment: Meaning investments in real estate are long-term. Since real estate transactions are complex and lots of money is involved or it is capital intensive, transactions are not made very frequently.  Location or Area Preference: Meaning people’s preference for a specific area.  Cont.…  little flexibility in terms of supply and demand:  property supply is constant over a short term and cannot be changed, while the little flexibility stems from a lack of substitutable property  Physical Characteristics /Attributes of Land  Free Gift of Nature: Land is not the outcome of human labor. Rather, it existed even long before the evolution of man.  Perfectly inelastic supply or fixed in quantity: t is limited and cannot be increased or decreased with human efforts.  Grad ability (Land Differs in Fertility and location): Fertility of land differs on different pieces of land. One piece of land may produce more and the other less.  Indestructible factor (Land is Permanent): human beings can not destroy the land completely. But Its fertility may be varied  Physical Characteristics /Attributes of Land  Land is a Primary Factor of Production: In any kind of production process, we have to start with land.  Immobility: Meaning geographical location of the property or parcel of land remains the same & can never be changed, it is fixed. cannot be transported from one place to another.  Indestructibility: land cannot be destroyed or worn out. It is durable and permanent.  Uniqueness: no two parcel of the land can be exactly the same. Even though they may share similarities, every parcel differs geographically.  Durability: the real estate is unlimitedly transferred to next generation. Real estate investment can be extremity durable and build multi generation wealth. We can sell it in a few days if you a good opportunity, or you can hold it for decades.  Cont.…..  Land is a Passive Factor of Production: This is because it cannot produce anything by itself. For example, wheat cannot grow on a piece of land automatically. To grow wheat, man has to cultivate land. So, labor is an active factor but land is a passive factor of production.  Cont..  So the land resource is need to manage in a good manner and use effectively for the country economic development. Unless if the land resource is poorly managed, it can become contentious often leading to disputes, conflict, degradation and other problems, all of them drivers of slum development and poverty in urban areas.  1.4. Characteristics of land based resources Land-based resources refer to the natural resources that are found on or within the Earth's surface. These resources play a crucial role in supporting life and human activities.  Some characteristics of land-based resources include: 1. Finite Availability: Land-based resources are finite in quantity. They exist in limited amounts and can be depleted over time if not managed sustainably.  1.4. Characteristics of land based resources 3. Variety: Land-based resources encompass a wide range of natural elements, including soil, minerals, forests, water bodies, wildlife, and agricultural lands. 4. Renewability: Some land-based resources are renewable, meaning they can be replenished or regenerated over time through natural processes. Examples include forests, water bodies, and soil fertility.  1.4. Characteristics of land based resources 5. Non-renewability: Conversely, some land-based resources are non-renewable, such as minerals and fossil fuels. Once these resources are depleted, they cannot be replaced within human timescales. 6. Interdependence: Land-based resources are interconnected and often dependent on each other. For instance, healthy soil is crucial for agriculture, which in turn relies on water resources. 7. Ecological Importance: Land-based resources play vital roles in ecosystems, providing habitats for diverse flora and fauna, regulating climate, and contributing to the overall balance of ecosystems.  1.4. Characteristics of land based resources 8. Economic Value: Land-based resources have significant economic value. They form the basis of various industries such as agriculture, forestry, mining, and tourism, contributing to national and global economies For those land based resources effective Regulation and Management strategies are necessary to ensure the sustainable use and conservation of land-based resources, balancing human needs with environmental protection and preservation for future generations.. THANK YOU