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WEEK 2 The Real Estate System - Coggle Diagram
WEEK 2 The Real Estate System
4 Quandrant Model
Space Market: Rent Determination (SR)
Compares Rent and Stock
Top Right Corner
Includes demand curve & SR supply curve
Asset Market: Valuation (SR)
Compares Rent and Price
Top Left Corner
Includes Cap Rate
Flatten Cap Rate
Decrease Cap Rate= Increase Price
Decrease Cap Rate= Decrease NOI
Steapen Cap Rate
Increase Cap Rate = Increase Price
Increase Cap Rate= Increase NOI
Asset Market: Construction (LR)
Compares Price and Planned Construction
Price determines construction
Increase Price = Increase Construction
Includes X-intercept
LR fixed costs of construction (Replacement Cost of Rent
Includes LRMC curve
Bottom Left Corner
Influenced by market prices which determine the availability of capital
Space Market: Stock Adjustment (LR)
Compare Stock and Planned Construction
Includes Construction Rate (time) curve
How productive/efficient the project/development is
Bottom Right Corner
New Contrsuction is necessary to maintain a given stock of available space
Negative Feedback Loops
Self-Stabalising Mechanism
Tends to dampen the changes in the system
keep it in control
preventing it form spiralling out of control
prevent asset bubbles from forming
Positive Feedback Loops
prices rise or fall fuels rather rises or falls in asset price
Creates property bubble and/or crashes
Extreme Rise= irrational enthusiasm among investors= prices inflate far beyond value
Unexpected Drop in prices= mass panic among investors and a sustain celling cycle
4Q Model: Shocks and Booms
BOOM
SHOCKS