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
True or False:
Purchasing a home is not the single largest investment a family makes
False
Property in general is more “…” (difficult to sell quickly) than stocks and bonds?
illiquid
True or False:
Liquidity depends on conditions and market size
True, buoyant markets have higher liquidity (fewer days on market needed for sale) than depressed conditions with falling prices
Main (larger) markets tend to be more liquid regardless of market conditions
Back in May 2017, name one of the two NZ housing markets that were affordable (median prices were less than 3x median household incomes).
west coast, whanganui (wanganui)
Property has “… …. ….” as it is expensive and illiquid
high transaction costs
In what COUNTRY did two cities recently impose 15% foreign buyer stamp duties (tax) to dampen demand?
Canada (Vancouver and Toronto)
True or False:
Global wealth is dominated by real property
True
True or False:
Globally property accounts for 56% of total global wealth whereas residential property alone accounts for 42%.
True
True or False:
The key reason for widespread mortgagee sales (foreclosures) across the U.S. post-GFC was the prevalence of non-recourse mortgages where banks cannot chase borrowers for unpaid loans after homes are forcibly sold.
Widespread mortgagee sales in U.S. post-GFC was largely due to non-recourse mortgages
False
Based on the 2016 BProp graduate survey, _______ was the most popular first job in the industry for fresh grads
Valuation
Non-recourse loans aside, the risk of foreclosure (mortgagee sale) skyrockets once borrowers enter “____”, when they owe more to the bank than their home is worth.
negative equity
True or False:
Negative equity occurs when a borrower loses some, but not all, of their equity (deposit) invested in a home
False
True or False:
A ‘Corporate Real Estate Manager” is essentially a property manager who represents a corporate client.
False
How much of the energy used per capita in modern, developed nations did early civilisations operate on?
Roughly 1%
What is the dominating factor regarding sustainability?
energy dilemma
According to the UN, buildings account for approximately ____% of global energy consumption
40%
What percentage of electricity do buildings use?
60%
True or False:
Buildings emit 1/3 of GHG emissions
True
______ and _____ production are energy and ghg intensive
Cement, steel
The building industry is sometimes referred to as being the “last mile” of decarbonisation due to the difficulty of finding sustainable methods of producing _______ & steel given the intense energy inputs required by these TWO ubiquitous construction materials.
cement
In the year ______ the ‘global crossover’ occurred (more people living in cities than rural areas)
2008
True or False:
The ‘global crossover’ will occur around 2050 (when more people will live in urban cities than rural areas), thereby further expanding the property industry’s eco footprint.
False
According to the research by Treloar which investigated the life-cycle energy consumption of typical office buildings, the energy consumed during initial construction (embodied energy) amounts to roughly ___ of the total lifetime energy use.
Treloar found energy used for commercial construction is roughly ____ of lifetime bldg energy use.
1/3
What is a whare whakairo
Carved meeting house
True or False:
A whare whakairo building elements embody Maori cosmology
True
True or False:
Speakers at a whare whakairo personify the building as living since it represents the iwi’s ancestor(s).
True
A whare whakairo’s koruru (gable head) represents an ancestor’s ________
face, often the founding ancestor
A whare whakairo’s tāhuhu (ridge beam) represents an ancestor’s ______
spine
True or False:
Early Maori wharepuni (sleeping houses) tended to be large dwellings rivalling the size of European settlers’ Victorian Villas.
False
True or False:
Maori used materials found around them (nature) when creating their buildings
True
Exchanging a whare whakairo for ________ would be akin to selling a relative
money
Post GFC, Auckland property investors tended to purchase _____ homes than first home buyers.
More
True or False:
Residential properties outnumber commercial BUT, globally, commercial property has more value
False
