EC203: Real Estate Economics and Finance

This course is an introduction to the theoretical and practical functioning of urban real estate markets using concepts from urban economics, finance and real estate economics.

In the first half of the course, we will cover the productive and consumption advantages of urban areas and location patterns within cities. We will see how these help determine demand for residential and commercial real estate, as well as looking at differences in supply for different types of properties. We will also discuss the impact of policy, with a special focus on taxation and urban planning.

Equipped with this framework, the second half of the course will explore how demand and supply for space determine real estate asset prices and how to measure them. We will then discuss how those measures can be used to value commercial real estate, as well as other techniques for valuation, focusing on cash-flow analysis. From there, we will explore how those valuations, financial leverage, and portfolio considerations are used to make real estate investment decisions. Finally, we will investigate the drivers of real estate cycles and emerging market trends to study their implications for investment outcomes.

A major component of the course is the case study in which students value a mixed-use commercial real estate property using the knowledge and techniques they have learned.

This course will be particularly relevant for students interested in employment in real estate related fields in the public or private sector; or for students who are considering further education in this field.

Students will be expected to bring a laptop to class in order to prepare their case study assessment for submission.

Prerequisites: Introductory microeconomics and introductory statistics

Level: 200 level. Read more information on levels in our FAQs

Fees: Please see Fees and payments

Lectures: 36 hours

Classes: 18 hours

Assessment: One case study (25%) and one written examination (75%)

Typical credit: 3-4 credits (US) 7.5 ECTS points (EU)

Please note: Assessment is optional but may be required for credit by your home institution. Your home institution will be able to advise how you can meet their credit requirements. For more information on exams and credit, read Teaching and assessment

This course is particularly relevant to students who are interested in pursuing a career in real estate related fields. It is also suited to students who are considering further education in this field.

• Discuss the determinants of locations decisions of households and firms within and across cities
• Use the urban economic models to predict how urban structure and real estate prices may be affected by changes in the city
• Recognize urban areas differ with regards to their supply constraints, and understand how these constraints are shaped by human and natural factors
• Predict the effect of different microeconomic policies on Real Estate prices based on theoretical and empirical evidence
• Explain the differences between different valuation measures in residential and commercial real estate
• Analyse the impact of financial leverage and portfolio considerations on an investment decision
• Draw on theory to assess the impact of a shift in supply and demand on residential and commercial property markets.

The design of this course is guided by LSE faculty, as well as industry experts, who will share their experience and in-depth knowledge with you throughout the course.