Rent determination and capital/land substitution : the case of a regional city central business district

The initial impetus for an examination of the Wollongong property market, in particular land value determination in Wollongong, arose from a concern which the writer had about the efficiency (or apparent lack of it) of the property market, as reflected in the growth in the quantity of vacant commercial floor space (in the central business districts of Australian cities) at a time when residential accommodation appeared to be in short supply. The original notion was to build a model simulating supply/demand characteristics in order to better understand the property market mechanism, especially the supply side. This notion has not been fulfilled simply because there were too many questions which established theory (or lack of it) failed to deal with adequately to allow any semblance of a simulation model. In particular two problems stood out, and it is these which the research has attempted to deal with: 1) established land value theory appeared unable to offer a satisfactory explanation for the land value pattern in the Wollongong central business district (and'hence appeared to have limited usefulness for predictive purposes there); 2) the literature appeared to offer little in the way of either establishing what may be regarded as an 'appropriate' committment of capital to a site in the central business district, or in specifying the interrelationship between the quantity of capital committed to be site and the inherent value of that site.