Table of Contents
2.0 Using supply and demand analysis, identify which you believe to be the main factors in determining the price of commercial property in the UK (Task 1).
2.1 Demand for commercial property.
2.2 The supply of Commercial property.
3.0 Identify and explain the main governmental/economic policies that could be used to influence the demand for Commercial property in the UK (Task 2).
3.1 Interest rates.
3.3 Rateable values.
3.5 Building new commercial properties.
3.6 Complementary goods.
3.7 Substitute goods.
3.9 Equilibrium Commercial property.
According to Forsyth (2017), Commercial property can be defined as the real estate property using for running business activities. Normally, it indicates the buildings that used for housing business. Additionally, it can be included land and residential rental properties using for generating profit. This assignment prepares an essay on the supply and demand theories and economic principles to the market for commercial property in the UK. Additionally, the demand factors and the supply factors are also evaluated to know the exact position of the market. This paper also evaluates the governmental/economic policies affecting the business of commercial property.
2.0 Using supply and demand analysis, identify which you believe to be the main factors in determining the price of commercial property in the UK (Task 1)
2.1 Demand for commercial property
The demand law forecasted that the price has a negative connection with the demand of something (Straus, 2016). In the case of price consideration, other things are taken as stable and unchanged. In this situation, price level increases reduce the demand level but prices level decreases increase the demand level (Wanda, 2018). For this reason, the demand for a commercial property depends on the price level mostly. After the price level, interest rate and taxation policy also influence the demand of the commercial property. For example, if the price is moderately lower, but the collection of funds requires more interest rate along with the higher tax rate in the purchasing of commercial property, the demand can be reduced. On the other hand, if the price is moderately high, but the collection of funds requires less interest rate along with the lower tax rate in the purchasing of commercial property, the demand can be increased (Goodman, 2016). The nature of the property, income level of the people and the price and quality of substitutes goods have also affected the demand of the commercial property. Mallette (2015) stated that the demand for commercial property also depends on the taste, choice and status of the people. The demand law suggested that the price level and the customers’ demand can’t go in the same direction. It can be considered as the negative correlation between these two factors. The following figure shows the relationship between the commercial property and price level in respect of the demand curve.
From the above chart, the demand curve represents the demand of the commercial property on the basis of price factors. When the average price of commercial property is less, the quantity demand is large. But when the average price of commercial property increases from 200000 to 250000, the quantity demand is reduced from Q to Q1 that represents the negative relationship between the price level and the customers’ demand for commercial property. In this figure, D represents the demand curve of the commercial property that is down-warding position.
Besides the price factors, other factors also influence the demand for commercial property. These factors also include different angels by which the demand can be determined. Following are the factors of demand:
Types of commercial property: The commercial property has several kinds including retail, office, and industrial property. In the case of retail property, the demand is not similar to the office and industrial property (Wanda, 2018). The number of retail businesses is more in the UK and it has higher demand in the UK market. On the other hand, industrial property has also a remarkable demand to launch industrial work. Therefore, the demand for commercial property can be determined on the basis of the nature and types of the property.
Regional and local demand factors: Streukens (2018) stated that regional and local demand also affects the demand for commercial property. The favorable demand factors increase the demand but unfavorable factors reduce the demand. The regional and local demand depends on the people’s income, loan facility and the availability of the property. These factors’ suitability increases the demand for commercial property.
Population: Streukens (2018) stated that the population size one of the important determinants to determine the demand for commercial property. The large size population increases the business area that requires a huge amount of commercial property. Here, the property demand increases. On the contrary, the small size population reduces the business area that reduces the demand for commercial property.
Interest rates: Most people take loans to start a business or commercial property because it requires a large amount of money (Streukens, 2018). Therefore, interest in loans has a great impact on the demand for commercial property. In case of a lower rate of interest with the huge supply of property, the demand for property is increased. On the other hand, the higher level of interest rate on loans increases the cost of collecting money that ultimately reduces the demand………………………………..