Which of the following factors influences the value of real estate according to economic principles?

The influence of supply and demand on the value of real estate is a fundamental concept in economics and is widely recognized in property valuation. When demand for real estate increases while the supply remains fixed, prices will typically rise as buyers compete for limited properties. Conversely, if supply exceeds demand, prices generally decrease. This dynamic directly affects the market value of properties, as it reflects the interplay between what buyers are willing to pay and the availability of properties for sale.

While factors such as climate changes, preference of ownership, and government subsidies can have an impact on the real estate market, they are often considered secondary influences compared to the basic economic principle of supply and demand. Climate changes might affect specific regions over time, ownership preferences can change based on societal trends, and government subsidies may encourage or discourage investment in certain areas, but these factors do not consistently dictate market values in the same direct and immediate way that supply and demand does. Thus, understanding supply and demand is essential for anyone involved in real estate, particularly in appraisal, as it forms the foundation for valuing properties accurately in the marketplace.