1. Construction & Property Economics Lesson 3 – Micro and Macro Economy – Built Environment

3. Economy MICRO Economics MACRO Economics Individual Behavior
Total Population / Society/ Nation
Company Performance
Industry / Market
Individual Income
National Income
Individual Demand
Market Demand
Individual Demand /Supply curve
Market Demand/Supply Curve
The study of how consumer, business , and industries collectively determines the quantity of good and services demanded and supplied at different prices
The study of “Big Picture” issues in an economy, including competitive behavior among firms, the effect of Government policies and overall resource allocation issue

4. Recap from lesson 2 : Individual Demand Curve and the Market Demand Curve
The market demand curve is the horizontal sum of the individual demand curves of all consumers in that market.
(a)
Lewis’s Individual Demand Curve
(b)
Carly’s Individual Demand Curve
(c)
Market Demand Curve
Price of blue jeans (per pair)
Price of blue jeans (per pair)
Price of blue jeans (per pair)
£100
£100
£100 D
Market
£50
£50
£50
Individual Demand Curves and the Market Demand Curve
Lewis and Carly are the only two consumers of blue jeans in the market. Panel (a) shows Lewis’s individual demand curve: the number of pair of jeans he will buy per year at any given price. Panel (b) shows Carly’s individual demand curve. Given that Lewis and Carly are the only two consumers, the market demand curve, which shows the quantity of blue jeans demanded by all consumers at any given price, is shown in panel (c). The market demand curve is the horizontal sum of the individual demand curves of all consumers. In this case, at any given price, the quantity demanded by the market is the sum of the quantities demanded by Lewis and Carly. D D
Lewis
Carly 3 4 2 3 5 6 7
Quantity of blue jeans (Kgs)
Quantity of blue jeans (Kgs)
Quantity of blue jeans (Kgs)

5. Relationships between Construction and Property Market
DEMAND
(Investment/Individual)
House Price
Speculative Demand
No of Household
Economic Growth
Availability of mortgage
Availability of housing
Interest Rate
SUPPLY
(Construction)
Supply of Housing
New Builds
Number of Selling

6. FACTORS IMPACTING PROPERTY INVESTMENT

8. Micro Economy in Built Environment
What are the consideration factors when buying a property
Needs – Age and size of family
Purposes – Investment or self-stay
Type – Commercial/ Residential
Tenure – 99 years vs freehold
Affordability – Household Income and Price
Initial and monthly cash flow – Opportunity cost on the cash flow
Interest Rate
Tax – Property Tax / Stamp Duty + ADSD
Resale potential

9. Macro Economy in Built Environment
(Foreign Direct Investment)

10. Macro measure of Economic Performance
Real Wage * Investment
Labor Productivity * Trade Balance
Real GDP
Increase in GST * Decrease in real wage
Increase in Consumer Price Index (CPI)
Inflation
Mismatch of skill with vacancy * Labor Structure change
Invasion of foreigners * Recession
Unemployment
Exchange Rate * Environment Factors
Saving Rate * Devaluation in money
Current Account
Life Expectancy * Environment Factors
Happiness Level * Physical Security
Well Being Index

12. Gross Domestic Product (GDP)
Definition
1. It includes both private and public consumption, government outlay, investment
and exports less imports (Trade Balance)
2. The GDP is the monetary value of all the finished goods and services within a country.
Interpretation
1. The GDP is used as an indicator of the economic health of a country as well as a metric
of standard of living
2. A better than expected reading should be taken as positive or bullish for the currency
3. A worse than expected reading should be taken as bearish for the currency

13. Consumer Price Index (CPI)
Definition :
The Consumer Price Index (CPI) is a measure of the changes in the average price of good and services that consumers normally
purchase such as food, clothing, medical and others.
CPI is also a measuret that indicates changes in the general price level from the base year to the current year.
Note :
There is an inverse relationship between the general price level and the value of money.
The value of money is the purchasing power of the consumer, or the ability to buy good and services.
When the general price level is higher, the value of money will be lower and vice versa.

14. Learning economics is not just understanding terms and definition.
It is about putting the basic theory into everyday life and assist to make Rational Decision versus the Opportunity Costs
Looking at practical example :
Singapore Overview Property and Construction

15. Singapore Sectorial Growth last 12 months

16. Singapore GDP Growth – past 12 months

17. Singapore GDP Vs Key Economic Growth

18. Total ASPAC - Construction Market – past 10 years

20. Correlation between Construction and Property Market in Singapore

21. So what is your prediction on the Singapore Property construction and residential market from 2019 – based on the facts presented ?