What are the three main factors that derive the value of real estate?

The three main factors that derive the value of real estate are location, scarcity, and utility.

Location is often emphasized in real estate because it significantly affects a property's desirability and, subsequently, its market value. Properties situated in desirable neighborhoods or proximity to amenities like schools, parks, and businesses typically command higher prices.

Scarcity refers to the limited availability of land and properties. In real estate, when a particular type of property or land becomes scarce—due to factors such as zoning restrictions, geographic limitations, or heightened demand—its value can increase sharply. This principle is central to how real estate appreciates over time, especially in urban or popular areas.

Utility is the usefulness or functional capacity of a property to meet specific needs. This can include the design and layout of a home, the availability of resources like water and electricity, and the zoning that governs what can be built on the land. Higher utility often translates into higher value, as properties that serve the needs of buyers effectively tend to sell for more.

This combination of factors—location, scarcity, and utility—forms the core of real estate valuation and is essential for understanding how property values fluctuate in the market.