What economic characteristic of real estate refers to its limited supply?

The economic characteristic of real estate that refers to its limited supply is scarcity. Scarcity indicates that there is a finite amount of land and property available, which inherently elevates its value. Unlike other goods, real estate cannot be manufactured or increased in quantity to meet demand; the supply is fixed. This characteristic is fundamental to real estate economics and greatly influences market value and investment decisions.

Improvements relate to the modifications made to a property, enhancing its value or utility, but they do not directly address the concept of supply. Permanence of investment refers to the long-term nature of real estate investments and the stability they generally offer, rather than the availability of the land itself. Location preference highlights the desirability of specific areas but does not pertain to the overall limited supply of real estate. Therefore, understanding scarcity is crucial for anyone involved in real estate, as it drives market dynamics and investment strategies.