Economics of properties

Jotham Chiketa
Economics by definition refers to the allocation of scarce resources to satisfy consumer needs. On application, it refers to allocation of properties or houses by the real estate market to the people.

Types of economic systems

The main types of economic systems are as follows:

1. Market economy

2. Mixed economy

3. Command economy

Market economy

This is a system where provision or production of goods and services are determined by supply and demand in the market and in this case if there are a lot of people looking to buy or rent the properties, it means there is high demand of properties and hence the prices will go up.

If there are few people looking to buy properties the prices will likewise go down, thereby regulating the market.

Advantages of market economy

In real estate market there would be more productivity in terms of sales and rentals of properties due to equilibrium — properties sold or rented at an arm’s length thereby ensuring fairness and competitiveness on the market. It is the market which determines the economy.

Disadvantages of market economy

The consumers may pay more for a product or property which is of less value due to the system.

If the economy is trading negatively down, the real estate providers suffer due to lack of business.

There might be also an excess supply of money or a decline in the market. There are also economic disparities which may render the system to be unsafe to trade in due to the fiscal and monetary policies.

Command economy

This is a system where the rest of activities are state controlled. The Government of Zimbabwe is involved in this through the Ministry of National Housing and Amenities, where there is a mantra of provision of housing for all.

There are schemes where people buy garden flats or flats through the use of a deed of sale. It provides a more affordable scheme at affordable prices. Prospective buyers pay a certain deposit and pay balance instalments until they finish all payments.

Advantages of command economy

At least all low income earners may afford to have a decent home at the best payment schemes available.
They may consume now and pay later. It helps home seekers to have a financial plan and may invest more and wisely.

Disadvantages of command economy

Home seekers may join schemes which are not favourable due to desperation and may be affected by foreclosures in their obligations of monthly payments and end up losing the investment and return to the original status of lack of accommodation.

Mixed economy

This system is a combination of both market system and command economy.

Supply of real estate products such as housing or stands trades at an arm’s length, where prices are subjected to fairness in the open market.

The market remains balanced in terms of demand and supply meaning, no excess housing or stands or shortages because of elasticity while command economy embraces the use of government intervention or regulations which limit the values of properties for sale or rentals through the rent regulations.

The system provides housing to the less privileged and low income earners.

Advantages of mixed economy

There is an equal provision of the services as prospective home seekers may choose the system which suites their capabilities and live comfortably in their new acquired properties without challenges and still maintain their social wellbeing without difficult.

The system rather provides a choice to the home seekers and everyone is taken care of accordingly.

Disadvantages of mixed economy

The system might not be vibrant given the concept of being mixed system, the market is shared and at times it may perform to its best or may seriously go down. There may also be gluts due to excess supply of real estate products.

Disclaimer: No responsibility is taken upon the writer for anyone who uses this information. Anyone who wants advice may contact the undersigned or other reputable organisations.

Jotham Chiketa is a member of the Real Estate Institute of Zimbabwe and write in his own personal capacity. He is contacted on Email: [email protected]; whatsapp: 0773 323 624.