Lecture 1 Revision - Important concepts

Real Estate as an Asset Class

Tangible Asset (physical)
When viewed as a tangible real estate includes:
- Land (Cuius est solum, eius est uesque ad coelum et ad inferos)
  - Has to be real estate? Where does it start and stop?
- Improvements on the land (appurtenances)
- Does not include removable items (plant & equipment)
Can it be Intangible (nonphysical)?
- Contractual rights (ie leases, mortgages, options etc) - NO
- Easements & Profit-a-prendre - YES
Property Rights vs Contractual Rights
- Privity of Contract vs Rights against the world
  - I can only enforce my rights against the person I have a contract with
  - Rights against the world - trespassing on your occupied property
Bundle of Rights Theory
- Ownership (private right enforceable against strangers)
- Possession (possession is 9/10 of the law)
- Control (what is built and what takes place)
- Enjoyment (can use as see fit)
- Exclusion (no trespassing)
- Disposal (sale, lease or by will) & Destruction
These rights are not unconstrained
- Government controls (ie Planning, Environment, Heritage and Property Laws, Compulsory acquisition)
  - If the government decides it wants to build infrastructure on your land they can do it
- Common law (ie nuisance)
- Self imposed (Contracts – restrictive covenants, leases, mortgages, liens, caveats)

Capitalist perspective
- Private ownership of property is an individual right
  - Every individual has a right to privately own property
- Liberal democratic society grundnorm (freedom and liberty)
  - grundnorm - foundational principle of liberal democracy
  - Property rights - communitarial obligation (heritage buildings, environmental protection etc.)
Socialist perspective
- State controls ownership and use of real estate
- State allocates land based upon society needs
- Private ownership limited – no right to buy or sell
Communist perspective
- State owns all real estate. Private property is abolished
  - Determination of how it is used an allocated
- State determines how real estate is used and allocated, with the goal of equal distribution of resources and wealth
- Hybrid models exist

Heterogeneous Products
- Real Property is unique
  - Might be nearly identical in nearly every aspect, never the same
Immobile Products
- Real estate exists in a defined spatial context
- Buildings can be relocated but land is immovable
Localised Market
- Markets differ from region to region
Segmented Market
- Segmentation can be based on use, size/scale and location
- further drill down - layers that perform differently.
Private negotiations with high transaction costs
- Time consuming, costly and complex
- Private negotiations between purchaser and seller
- In real estate in Australia, we are charged stamp duty - charge by the government to 'stamp' your enforce your contract
  - Based upon the value of your contract

Corporate Property

Investment Property