Main Factors Which Determine the Demand for the Construction of Built Facilities and Outline How These Factors Have Operated on This Demand in the Last Two Years.

2165 Words Nov 23rd, 2010 9 Pages
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IDENTIFY THE MAIN FACTORS WHICH DETERMINE THE DEMAND FOR THE CONSTRUCTION OF BUILT FACILITIES AND OUTLINE HOW THESE FACTORS HAVE OPERATED ON THIS DEMAND IN THE LAST TWO YEARS.

The determination of demand of goods and services produced the construction industry is a complicated process. This is partly due to the cost, size, longevity and investment nature of the and partly due to the broad range of what constitutes construction activity. It is difficult to envisage just one housing market (Danny Myer, 2004).Factors affecting built facilities construction demand can be categorised as general and local factors. General factors are political, economic, social, and technological and legal/legislative based. Local factors
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CONSTRUCTION PRICE
The relationship between the price and the commodity price is a recurring theme in the economic literature. McConnell et al (2009) shows that the price levels of a commodity are dependent on the demand of that particular commodity. The construction industry also follows the same model; the construction price levels are dependent on the demand for construction. It is also suggested that a fluctuating demand for construction leads to fluctuating prices and vice versa suggesting that the demand for construction may depend on the relative price of construction. A common measure of trends in price in the construction industry is the tender price index, which measures the treads in the cost of construction to construction clients and reflects the trend in the accepted tender prices. Therefore we can say that the construction price of built facilities determine the demand of the built facilities, because when the price goes down the demand goes up.
REAL INTEREST RATE
Real interest rate may be used as a proxy variable for credit market conditions (Akintoye et al, 1993). the cost-of living indices or consumer price index that provides a rough estimate of changes in prices are incorporated into interest rate to arrive at real interest rate as a measure of credit market conditions for the investors. Investment in construction is most likely to be financed from loan credit or organisation profit; hence real

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