Urban Land Prices in a Market System - Essay Example

There are many factor demand and supply determinants that are likely to impact the prices of the land. But, for our initial understanding we know that as far as land is concerned its demand may be very large or infinite but the supply of land that is available for any purpose is fixed such that an invariably high price change is also unable to alter the supply in any way. Thus, when we consider land pricing in terms of factors effecting demand and supply then too we know that there are some strange and peculiar behaviors for the price of land which is normally known as rent.

Now individually, we will consider the effect of factor demand and supply on the land prices. The factor demand can be price, productivity of the prices of other factors. These affect by causing the shift in the demand curve. According to the common rule of law, an increase in factor price decreases the demand for it and decrease in factor prices increases the demand for it. Firstly, let's consider the factors that are likely to affect the demand of land; speaking in context of urban land markets people generally prefer land for housing located near the city centre, land is valued more where it is in proximity with the local nodes than far from them, and also land is preferred in areas where living conditions are better and the standard of living is relatively high.

Thus in these areas or localities land prices are relatively higher compared to areas far from the city centre or where the living conditions are shabby. Another factor affecting the demand is productivity, when we talk about the productivity of land here in the urban sense e refer to the amount of the urban containment that the land can have. This is affected by the conventional planning and also the zoning practices of the area such as housing size requirements etc. Thus, it is noticed that urban containment has grown over the years and hence the prices of the urban areas has also increased.

Lastly, another factor that is likely to impact the demand of goods is the change in prices of another goods, substitutes or complements. In areas where there are chances of development, the land is in more demand and hence, the price of land increases more rapidly compared to the areas that are relatively stable and already developed.Now, moving onto the factor supply and its effect on the price and the quantity supplied, some of the determinants include market supply determinants which include the resource prices, technology, other prices, expectations and the number of the sellers; then there are market demand determinants and lastly the mobility of the factors.

In considering the supply of land in urban areas then it is driven by topography, physical conditions, patterns of land ownership, availability of infrastructure and also the government regulations. The urban land markets are not monopolistic at all, since the ownership of land is quite diffused and not at all concentrated in a few hands; therefore it becomes difficult to determine the price under one roof. And the value of land in urban areas is largely determined by the few large sellers, when there preferences change in total then they tend to sell the land as earliest as possible.

But the utmost characteristics of land supply are that it is limited and no factor can facilitate