What is the second prerequisite to value according to economic principles?

The second prerequisite to value according to economic principles is scarcity. Scarcity refers to the limited nature of resources as compared to the seemingly unlimited wants and needs of consumers. In real estate and property valuation, the concept of scarcity implies that for something to have value, it must be relatively rare or hard to come by.

When a resource is abundant, it usually has little value. Conversely, when demand for a resource outstrips its availability, its value increases. In the context of property, if there are few homes in a desired location or if land is limited in a growing urban area, the scarcity of that property enhances its value. Thus, scarcity is fundamental in establishing value, as it directly influences the dynamics of supply and demand in the marketplace.

Utility, capacity for private ownership, and demand all play important roles in value determination but do so in contexts that are different from the foundational concept of scarcity. Utility pertains to the usefulness of the property, capacity for private ownership relates to legal rights, and demand represents consumers' willingness to pay, but without scarcity, those factors cannot effectively establish significant value.