Macro micro factors

Macro (economy-wide) vs micro (location / neighbourhood) factors affecting value.

2 questionsAnswers & explanations includedFree — no sign-up

Question 1

Reviewing three decades of index data, a salesperson notices that one complete cycle ran a little over five years while another took closer to fifteen, with no obvious pattern between them. He asks a colleague whether the length of a cycle can be predicted in advance from the characteristics of the properties transacting during it — their type, their age, their location — or whether something else altogether governs how long a cycle runs.

Which statement is correct?

A. Cycle length is fixed and does not vary between cycles.
B. Cycle length is governed by the micro characteristics of the properties transacted.
C. Cycle length is governed by the number of agents active in the market.
D. Cycle length is governed by macro factors, including economic conditions abroad.

Show the answer and full explanation

Answer: D

The rule. Cycle length is governed by macro factors, including economic conditions in other countries. It is neither fixed nor determined by the characteristics of individual properties.

Why D is correct. It identifies macro factors, and expressly includes conditions abroad.

The other options.

A treats cycle length as constant, which the stem's five-versus-fifteen contrast contradicts.
B attributes it to micro characteristics, confusing what moves one property with what moves the market.
C attributes it to the number of agents.

Exam note. Anything governing the market as a whole, including its timing, is macro.

Cycle length is governed by macro factors, including economic conditions in other countries →

Question 2

A prospective buyer is choosing between two units in the same development, on the same floor, of identical layout and area, released at the same price by the same seller. One faces a sheltered internal garden and is quiet at all hours. The other faces an expressway, from which traffic noise is clearly audible with the windows open and faintly so with them closed. He has been told that since both units sit in the same development and the same market, any price difference between them must be arbitrary.

Which statement most appropriately describes the factor at work?

A. A micro factor, being specific to the individual unit rather than to the market.
B. A macro factor, since traffic volumes reflect the state of the wider economy.
C. Economic obsolescence, since the expressway lies beyond the boundary.
D. No identifiable factor, aspect being a matter of personal taste alone.

Show the answer and full explanation

Answer: A

The rule. Aspect, outlook and exposure to noise attach to the individual unit and are micro factors. They explain divergence between units within the same development.

Why A is correct. Two units in the same development on the same floor differ only in what they face. That is micro.

The other options.

B treats traffic volumes as a macro proxy, which would affect both units alike.
C reaches for economic obsolescence, which concerns a change beyond the boundary reducing value over time — here the expressway is an existing condition distinguishing two units, not a change affecting the development.
D dismisses the factor as taste, when the effect on demand is systematic.

Exam note. A factor that separates two units in one development is micro by definition, however external its physical source.

Aspect, outlook and exposure to noise attach to the individual unit and are micro factors →

Practise it under exam conditions

Single questions test whether you know a rule. The paper tests whether you can find it in a scenario, at speed, with three plausible alternatives in the way. Start with the free 20-question half-paper.

Free 20-question paper The papers in PDF

Looking for past-year papers? CEA doesn't publish them — here's what it does publish.

Independent study material. Not affiliated with or endorsed by the Council for Estate Agencies. No pass guarantee — for study use only.