Tutorial 1, Polished

1. Read the Introduction to Property chapter. Identify and discuss 5 ways in which real estate assets are similar to other asset classes and then identify and discuss 5 ways real estate assets are different to other assets classes.

Similarities

1. Potential for appreciation: has the potential to appreciate in value over time
2. Income generation: real estate, like stocks and bonds, can generate income through rental or lease payments
3. Risk and volatility: real estate can be subject to market fluctuations and volatility, which can affect market value - subject to supply and demand
4. Diversification: means of diversifying an investment portfolio, similar to how stocks and bonds can be used for diversification

• Build to rent, other methods of diversifying a portfolio

5. Use of leverage: investors can use leverage to purchase real estate, similar to how margin can be used to purchase stocks
6. Liquidity: real estate, like other asset classes, though it may not be as liquid as some other investment
7. Demand and supply: influenced by demand and supply dynamics, which can affect is price and value over time

Differences

1. Capital Requirements: Most capital assets are available in units of comparatively small capital value, and do not physically deteriorate or change over time
2. Management: Property is a wasting asset

• Requires continual capital investment in management, maintenance and refurbishment
• the ability exists, through a number of means, to improve an individual asset compared with other assets in that sub-category;

3. Illiquidity: real estate investments are typically less liquid than other asset classes, meaning it may take longer to buy or sell a property compared to stocks or bonds
4. Fixed physical assets:

• Real estate exists in a defined spatial context
• Buildings can be relocated but land is immovable

1. Uniqueness: individual economic units are unique, difference from one another through a combination of physical, legal, taxation, and equitable parameters
2. Asset class is segmented: There are sub-categories, residential, commercial, industrial, public facilities, rural, mining, tourism etc as well as locational differentiation into CBD and fringe, etc.
3. Time horizon, creation and sale: Creation of new assets typically take one to two years to complete, this contrasts with the rapidly changing business cycle.
4. Private negotiations

• Time consuming, costly and complex
• Private negotiations between purchaser and seller
• In real estate in Australia, we are charged stamp duty - charge by the

2. Read pages 359 (from Does Private Property Exist) to page 374 of the Dialogue on Property by Cohen, F. Outline your views on the arguments made about the nature of private property and whether you think there are any alternate perspective frameworks that could challenge these arguments or make them outdated (ie feminist perspective, environmental impact of private property etc).

Arguments as outlined in the Dialogue of property:

1. Beginning argument; property is basically a set of relations among men, which may or may not involve external objects
2. Property and wealth; it is possible to have valueless property (a property which has no economic use and costs in taxes). Argument made that economic value is not essential to the existence of legal property

• Could be wealth that did not exist of private property
• Economic wealth exists in property due to its scarcity only

3. The case of Montana mule;

• social consideration of habits and forces, appealing to the sense of fairness lead the development of rules in property law, and that:
  • where considerations of productivity, certainty, enforceability, and fairness are divergent,
• we find controversial problems in private ownership