Building Economics Lecture Notes 733f24

ABA 2307 B. Arch 3rd Year 2015 BUILDING ECONOMICS Lecture 2

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Outline 

Course Overview

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Course Outline

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Semester Plan

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CAT’s & Assignments

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Building Economics

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• Construction Industry & the economy • Determinants of demand & supply

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• Cost in use/Life cycle costs

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• Estimating methods

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• Measurements & role of a QS 3

Construction Industry & the Economy Today's lecture plan, we will look at 

Introductions

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Role of the construction industry

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Industry & the economy

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Relationships & processes

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Complexity of the construction industry 4

Introduction 

The construction industry is the sector involved with erection, repair and demolition of buildings and civil engineering structures in an economy

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Construction industry & the property industry are intertwined 5

Introduction cont’ 

The construction industry handles the constructed-facility production process while the property industry handles the constructed-facility output.

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Demand for constructed facilities is satisfied either through the purchase or lease of a building from the existing stock 6

Introduction cont’ 

The function of the construction industry is therefore to serve the portion of total demand for constructed space in the economy that cannot be served from the existing stock of constructed space.

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Role of construction industry 

It provides constructed physical facilities which provide space where other activities

may take place 

The monetary value of all the buildings & civil engineering works produced by the industry in a given period of time, normally 1yr is referred to as the gross output of the constr. industry 8

Construction industry & the Economy 

The construction industry affects & is

affected by the economy 

The interrelationships between the industry & the economy stem from three distinct characteristics of the industry: ◦ Size; ◦ investment goods; ◦ Government is a client for a large part of its work 9

Construction industry & the Economy 

Size is important because changes in output

of the construction industry have a significant effect on the size of the national product both directly and indirectly. ◦ If the output of the industry is down, total investment is down, and the investment is of vital concern to the health of the nation. 10

Construction industry & the Economy 

It provides an investment good means that it is

subject to fluctuations in demand, for most of its products will be required only if certain other factors are favorable, e.g◦ the expected sales of goods, which a factory would produce ◦ the availability of mortgages for house purchase ◦ the economic climate in which government takes decisions about the level of social services 11

Construction industry & the Economy 

The dependence on government as a client

means that government is able to influence the demands on the industry by: ◦ action on its own proposed projects ◦ control of credit and interest rates

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Construction industry & the Economy 

There are 4 main aspects of economic life in

which the construction industry affects & is affected by the economy ◦ ◦ ◦ ◦

in demand and output in employment and incomes in balance of payments in the level of prices.

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Complexity of the construction industry 

It may be assumed to consist of sub sectors,

each sub-sector consisting of numerous projects, and each project involving different stages of activities from project conception to completion. 

The basic process conception to completion is regarded as the INPUT-OUTPUT. 14

Complexity of the construction industry

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Complexity of the construction industry

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Questions?

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