Land and Real Estate Markets
Samenvatting/ Summary
Introduction
This course covers the interaction between urban planning interventions and land/real
estate markets, focusing on sustainability, urban expansion, and transformation. Cities
are constantly evolving due to factors like population growth, economic development,
and climate change, which require significant investment in land and real estate.
1. Property rights and urban planning...............................................................................2
Market Concentration.....................................................................................................2
Market power..................................................................................................................2
Supply elasticity..............................................................................................................3
Soft to hard plans............................................................................................................3
Ronald Coase & Property Rights....................................................................................4
Henry George’s Single Land Tax....................................................................................4
Elinor Ostrom’s Collective Action..................................................................................5
2. Planning interventions...................................................................................................8
Regulatory planning........................................................................................................8
Market-based approaches...............................................................................................8
3. Dynamics of land and real estate markets...................................................................10
Supply and demand.......................................................................................................10
Investment behaviour...................................................................................................10
Virtuous and vicious value cycles..................................................................................11
Economic drivers...........................................................................................................11
4. Land management strategies and value capturing......................................................13
New Urban Agenda........................................................................................................13
Land Value Capture (LVC)............................................................................................13
Land Management.........................................................................................................14
Speculative housebuilding............................................................................................14
Strategic Land Banking.................................................................................................15
Land Readjustment.......................................................................................................15
Joint redevelopment.....................................................................................................18
PILaR (+).......................................................................................................................18
Public Value Capture and Climate Adaptation.............................................................19
, Land acquisition............................................................................................................19
1. Property rights and urban planning
Market Concentration
Mar ket con centr ation : distribution of market shares by companies/ measures
the extent to which market shares are concentrated between a small number of
firms. It is often taken as a proxy for the intensity of competition.
- Low con cen tr ation : not dominated by big firms, so a lot of competition.
- H igh con centr ation : big firms hold big shares, leads to market power.
The largest developers in the Netherlands control significant land banks (high
concentration), reducing competition and affecting the pace and type of housing
being built.
What causes market concentration:
- Autonomous growth and mergers;
- Investment capacity larger companies;
- Geographical context;
- Restrictions to supply;
- Complexity, uncertainties and risks;
- Typical for land and real estate development: connections between
markets.
The Herfindahl-Hirschman Index (HHI) is used to measure market concentration.
In medium-sized Dutch cities, high HHI scores indicate that a small number of
developer dominate the market.
Market power
Mar ket shar e : This is the share of a company’s turnover or production in the
total market size.
(Abuse of) Mar ket pow er : when a company can act independently from
competitors and consumers, it holds market power. This is often seen in the
housing market, where developers with large land banks control supply.
- Positive eff ects: process efficiency, reduced transactions costs,
economies of scale, expertise big;
- Negative eff ects: form of forced shopping, information asymmetry,
imbalance in power relations.
Concentration in land markets can allow certain developers to hold onto land
without developing it, waiting for property values to increase.
Developers hold large land banks, which gives them control over future
development and delays housing production. This drives up prices, leading to
housing shortages.
2
, In the Netherlands, market concentration is a significant issue, where a few large
developers control most of the land. This creates locational monopolies, allowing
developer to influence the supply and type of housing.
- Location al m on opolies : a type of monopoly that exists in a particular
geographic area or market. When a single firm is the only provider of a
particular good or service in a specific area, or when a firm has a dominant
share in a particular region.
The housebuilding crisis is an insider-outsider problem. Outsiders are the first time
buyers. The rent market also has an insider-outsider problem.
Supply elasticity
H ousin g supply elasticities : the response by builders to a change in house
prices.
Elastic supply means that if prices of houses increase with 1%, than the production
of new houses would increase with 1% as well. That is a perfect elastic market.
A larger supply elasticity means that, for a given change in house prices,
homebuilding expands by a greater amount.
The more inelastic housing supply becomes, the more rising demand translates
into rising prices and the less into additional housebuilding.
The Dutch housing market is less elastic than many other countries. Could be
causes by:
- (long) planning process;
- Not much land available;
- A very populated country;
- Very restricted spatial planning.
Soft to hard plans
From soft to hard plans:
- Start with a ‘’soft plan,’’ which is flexible and can be adjusted. Once the plan
becomes ‘’irrevocable’’ (or a ‘’hard plan’’), developers can actually start
building. This change marks the plan as finalized and actionable.
Delays in constr uction : even after a plan is set in stone, it usually takes about
two and a half years before the actual construction kick off. Main reasons:
- Mar kets con dition s : Developers play the waiting game to make sure
they can sell the houses at good price. No one wants to build houses that no
one will buy.
- B uildin gs costs an d in fl ation : If costs are going up, developers might
delay starting construction hoping that prices stabilize or drop.
- Str ategic delays: Sometimes, developers might delay their projects on
purpose to sell at higher prices later. This tactic works best when there
aren’t other similar projects around to compete with.
3
Samenvatting/ Summary
Introduction
This course covers the interaction between urban planning interventions and land/real
estate markets, focusing on sustainability, urban expansion, and transformation. Cities
are constantly evolving due to factors like population growth, economic development,
and climate change, which require significant investment in land and real estate.
1. Property rights and urban planning...............................................................................2
Market Concentration.....................................................................................................2
Market power..................................................................................................................2
Supply elasticity..............................................................................................................3
Soft to hard plans............................................................................................................3
Ronald Coase & Property Rights....................................................................................4
Henry George’s Single Land Tax....................................................................................4
Elinor Ostrom’s Collective Action..................................................................................5
2. Planning interventions...................................................................................................8
Regulatory planning........................................................................................................8
Market-based approaches...............................................................................................8
3. Dynamics of land and real estate markets...................................................................10
Supply and demand.......................................................................................................10
Investment behaviour...................................................................................................10
Virtuous and vicious value cycles..................................................................................11
Economic drivers...........................................................................................................11
4. Land management strategies and value capturing......................................................13
New Urban Agenda........................................................................................................13
Land Value Capture (LVC)............................................................................................13
Land Management.........................................................................................................14
Speculative housebuilding............................................................................................14
Strategic Land Banking.................................................................................................15
Land Readjustment.......................................................................................................15
Joint redevelopment.....................................................................................................18
PILaR (+).......................................................................................................................18
Public Value Capture and Climate Adaptation.............................................................19
, Land acquisition............................................................................................................19
1. Property rights and urban planning
Market Concentration
Mar ket con centr ation : distribution of market shares by companies/ measures
the extent to which market shares are concentrated between a small number of
firms. It is often taken as a proxy for the intensity of competition.
- Low con cen tr ation : not dominated by big firms, so a lot of competition.
- H igh con centr ation : big firms hold big shares, leads to market power.
The largest developers in the Netherlands control significant land banks (high
concentration), reducing competition and affecting the pace and type of housing
being built.
What causes market concentration:
- Autonomous growth and mergers;
- Investment capacity larger companies;
- Geographical context;
- Restrictions to supply;
- Complexity, uncertainties and risks;
- Typical for land and real estate development: connections between
markets.
The Herfindahl-Hirschman Index (HHI) is used to measure market concentration.
In medium-sized Dutch cities, high HHI scores indicate that a small number of
developer dominate the market.
Market power
Mar ket shar e : This is the share of a company’s turnover or production in the
total market size.
(Abuse of) Mar ket pow er : when a company can act independently from
competitors and consumers, it holds market power. This is often seen in the
housing market, where developers with large land banks control supply.
- Positive eff ects: process efficiency, reduced transactions costs,
economies of scale, expertise big;
- Negative eff ects: form of forced shopping, information asymmetry,
imbalance in power relations.
Concentration in land markets can allow certain developers to hold onto land
without developing it, waiting for property values to increase.
Developers hold large land banks, which gives them control over future
development and delays housing production. This drives up prices, leading to
housing shortages.
2
, In the Netherlands, market concentration is a significant issue, where a few large
developers control most of the land. This creates locational monopolies, allowing
developer to influence the supply and type of housing.
- Location al m on opolies : a type of monopoly that exists in a particular
geographic area or market. When a single firm is the only provider of a
particular good or service in a specific area, or when a firm has a dominant
share in a particular region.
The housebuilding crisis is an insider-outsider problem. Outsiders are the first time
buyers. The rent market also has an insider-outsider problem.
Supply elasticity
H ousin g supply elasticities : the response by builders to a change in house
prices.
Elastic supply means that if prices of houses increase with 1%, than the production
of new houses would increase with 1% as well. That is a perfect elastic market.
A larger supply elasticity means that, for a given change in house prices,
homebuilding expands by a greater amount.
The more inelastic housing supply becomes, the more rising demand translates
into rising prices and the less into additional housebuilding.
The Dutch housing market is less elastic than many other countries. Could be
causes by:
- (long) planning process;
- Not much land available;
- A very populated country;
- Very restricted spatial planning.
Soft to hard plans
From soft to hard plans:
- Start with a ‘’soft plan,’’ which is flexible and can be adjusted. Once the plan
becomes ‘’irrevocable’’ (or a ‘’hard plan’’), developers can actually start
building. This change marks the plan as finalized and actionable.
Delays in constr uction : even after a plan is set in stone, it usually takes about
two and a half years before the actual construction kick off. Main reasons:
- Mar kets con dition s : Developers play the waiting game to make sure
they can sell the houses at good price. No one wants to build houses that no
one will buy.
- B uildin gs costs an d in fl ation : If costs are going up, developers might
delay starting construction hoping that prices stabilize or drop.
- Str ategic delays: Sometimes, developers might delay their projects on
purpose to sell at higher prices later. This tactic works best when there
aren’t other similar projects around to compete with.
3
