L01 - Overview of the property industry Flashcards
9 characteristics that set property apart from other assets
- Tangible
- Highly leveraged
- Diverse
- Durable
- Capital intensive
- Requires active management
- Illiquid
- Inefficient market
- High transaction costs
Properties begin life in _______
abstraction
What is the ‘bridge’ between abstract (where property is born in) and the real (where they end up)
Virtual reality
True or False:
Virtual reality is not good for things like overseas investors
False
Unlike other “____” assets such as gold, stamps, etc, property is unique in that it is capable of generating cash flow
hard
True or False:
Property owners cannot add-value (refurbish/redevelop) to their asset/property
False
What was the #1 investment type in 1998 but by 2016 fell to 2nd place behind rental property?
Listed Shares
According to the RBNZ, in 2016 NZ households preferred which investment?
Residential Property
How is New Zealand and Australia similar?
Both countries are seeing a downward trend in first home buyers
What does GFC stand for?
Global Financial Crisis
What can increase property values?
Increasing leverage (expanding credit)
True or False:
As seen in GFC, credit contraction can equally reduce property values
True
As of January 2016, what is the majority of the banks’ lending?
Hint: 2
Housing and Agriculture
If the RBNZ imposed a 5x debt to income limit to residential property lending in AKL in 2017, approximately how many transactions wouldn’t have been allowed?
60%
KPMG 2016 FIPS survey found bankers thought DTI (debt-to-income) ratios should be 5 to 7 but are actually ___
9 to 12
Even if property is identical in design, it is still unique. Why?
Each is unique because of location
- because property can’t move, that alone makes it diverse and unique from other asset classes
Why does the location of a property mater?
It is a big factor/influence to its value
True or False:
The minimum durability of a house is 30 years?
False, the minimum is 50 years
expectation according to building code = lasts 50 years
True or False:
Property is expected to outlive us
True
___________ is needed to keep up a property’s durability
Active management
A neighbourhood shopping centre tends to feature a large tenant (eg. grocery store), which serves as that centre’s ________
anchor, anchor tenant
True or False:
In a shopping mall, anchor tenants tend to pay lower rental rates than smaller tenants as they are critically important to attract patrons to the mall.
True