The Real Estate Sector and the Economy
What is real estate?
Real estate can be defined as physical property which includes land and improvements consisting of buildings, roads, utility systems and structures. The real estate sector can be broken down into several categories:
i. Residential real estate - consists of housing, apartments, and other types of living arrangements for individuals, families, or groups of people.
ii. Commercial real estate – includes purchase of existing property such as non-residential buildings, apartments and dwellings, developing and sub-division of real estate into lots, lessors of real property, real estate agents and brokers engaged in renting, buying, selling, managing and appraising real estate
iii. Industrial real estate – includes properties used by businesses for activities such as manufacturing and production, research and development, construction, transportation and storage.
iv. Agricultural real estate
v. Special uses
Who are the main players in the real estate sector?
The main players of the real estate sector are:
i. Property owners– buyers of real estate who purchase or lease a property for occupancy.
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ii.Investors and developers – buyers of real estate who purchase real estate to make a profit.
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iii. Financial institutions – institutions which help finance the purchase of the real estate property.
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iv. Regulatory Bodies -controls the development and use of land
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v. Real estate agents/brokers – individuals/firms which assist in the purchase, lease and sale of
a property between a buyer and seller for a fee or commission.
Why is the real estate sector important for an economy?
A well administered real estate sector contributes towards the major goals of an economy such as:
i. Affordable housing – housing is one of the basic needs of an individual, thus, a well- functioning real estate market can help achieve this.​
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ii. Employment creation – the real estate sector not only provides jobs directly to real estate agents/brokers, it also creates employment indirectly in the construction sector with growing demand for architects, engineers and labourers.
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iii. Support growth of an economy – the real estate sector’s strong linkage to other sectors such as building & construction, finance, transport, storage and accommodation sector contributes to the overall growth of the economy.
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iv. Provide economic stability – a well-functioning real estate market with stable prices offers assurance that the economy is doing well. Real estate serves as a guarantee for financing and is an important element of economic stability.
Size of the Real estate sector in Fiji?
Due to the nature, complexity and inter-linkages of the real estate sector with the rest of the economy, it is difficult to determine its actual size. However, certain indicators could be used to measure its importance and impact. In the case of Fiji, we consider the followings:
i .Commercial banks’ lending for real estate purpose - as at 31st October 2019, the total loans outstanding extended by commercial banks’ for real estate activity stood at $2.9 billion, which is almost 40 percent of commercial banks’ total loan portfolio.
The increasing trend of real estate loans indicates the demand in real estate activities and the growing importance of the sector to the Fijian economy.
Commercial Banks - Real Estate Outstanding Loans
Source: Commercial Banks
However, this contribution is assumed to be understated as it does not consider the indirect contribution of the growing real estate market to sectors such as construction, transport and storage facilities.
Real Estate Activities
Real Estate Activities
Real Estate Activities as % of GDP (r.h.s)
Source: Fiji Bureau of Statistics
Commercial bank real estate outstanding loans includes commercial and residential real estate loans.
iii. Approvals for Real Estate Licenses – Approval to conduct real estate business in Fiji is required under the Real Estate Agents Act 2006, which is administered by the Real Estate Agents Licensing Board (REALB), a corporate statutory body of Government. Over the past three years, there has been a general increase in the number of licensed real estate agents and salespersons in the country. This is, consistent with increased real estate activity in the economy
Licensed Agents And Sales Person
No of Agents
No of Salespersons
Source: Real Estate Agents Licensing Board
Summary
Fiji’s real estate sector has expanded steadily over the years and continues to grow. This demonstrates an increasing demand for housing and other types of developments in this sector.
Supportive macroeconomic policies and a conducive investment environment are important catalysts in enhancing development of the real estate sector to its full potential.
Moreover, collaboration between industry stakeholders is necessary to facilitate the timely implementation of policies to achieve industry objectives and help the economy to grow.
Disclaimer: This is a contribution from the Real Estate Agents Licensing Board (REALB). Email: pravin.narain@realb.org.fj for feedback.