Land in Ginza, in Tokyo, is one of highest in the World.
Some are valued at close to $500K/sqm or PhP25M/sqm!
One has to ask why.
The quick and apt answer is demand is high while supply is low. That is what economics teaches us.
While learning about Land Valuation of Real Estate Properties, walk with me around Ginza and appreciate Architecture at its prime. You may watch the video twice. First to read through the lessons, and the 2nd time, to enjoy the sights.
The value of land is established with its highest and best use in mind. Land can have various uses (residential, commercial, industrial, agricultural, etc.). Which use can produce the highest net return in any term, over a period of time?
There are several factors to consider. I’ll make a list, but the details can’t be covered in this short video, and should appear in future ones.
1.) Physical characteristics: topography, location, climate, shape, etc.
2.) Accessibility: easy travel to key destinations (office, mall, school, homes, etc.)
3.) Amenities, Facilities and Infrastructure: roads, telecoms, water supply, drainage, parks, public buildings (healthcare, gov’t service), etc.
4.) Future Projections and Potentials: are growth and progress in the horizon? On the other end, are there limitations (laws, development restrictions, etc.) or negative changes that will impact the area’s future?
5.) Demand and Supply: considering the above factors mostly positively present in the subject area, many want to be located there. “Land is finite,” though, and there is just a limited supply of real estate in the area.
If we will further sum up the factors above, we can state that real estate derives its value from its utility or usefulness. The higher the importance attached to that use, the higher the value of the real estate.
Question: Does good architecture or visually pleasing building designs add to utility, and hence value?
Question: Some properties in the Shibuya area are reportedly out-pricing some in Ginza. To what factor/s could this be attributed to?
Question: Who prescribes real estate prices?
These are just sample questions one may ask, and seek answers to. What’s your question?
Ask and learn.
Real Estate Market Valuation and Analysis
by Joshua Kahr