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The Way Real Property Can Be Used

1994 words - 8 pages

Real Estate is a tangible asset. You can see and touch it. Unlike shares, if your investment is performing badly you can do something about it, by upgrading the property or perhaps get a better tenant.
Requires Maintenance
Fixed property is tangible, therefore, it requires maintenance. The property needs to be painted, lawn needs to cut or sometimes some emergency repairs are needed such as an electrical faults or plumbing repairs.
Fixed property is heterogenic in that no two properties are the same. It will differ in some regard whether it is location, view, quality of construction or architectural style. Even when comparing two apartments in the same building you will find that they will differ in some respect.
Fixed property is immobile. Most other products are delivered to the consumer but with property the consumer needs to come to the property. If a property owner decides he wants to move to a more upmarket house, he will need to move to an upmarket suburb.
Low Liquidity
Unlike shares and stocks, property is not a very liquid asset. It can take at least a month to sell your property and there is also the delay of red tape, with the different authorities, e.g. the local authority first need to issue a rates clearance certificate before the deeds office will process a registration to the new owner.

Inefficient Markets
Fixed property is traded in an inefficient market, when compared to the JSE for example. The prices of shares and stocks are all in one place and information is easily accessible. With fixed property research is required and information is not always accessible to the general public.
Both an investment good and consumption good.
Real estate can be purchased as an invest good as well as a consumption good. A house can be purchased for personal use, where you and your family will live or it can be purchased as investments i.e. buy to rent.
High Transaction Costs
Generally purchasing property requires large sums of money. According to the ABSA property index the average value of a small house of 80m²-140m² is R778 000 in South Africa. Because of the high transactional cost associated with it, consumer also spends considerable time making a decision when buying.
Fixed property has a long life span and most buildings have an average life expectancy of at least 60 years. The improvements may deteriorate over time but the land will remain forever.
No fixed maturity
Unlike bonds or fixed deposits, real estate does not have a maturity date. The owner can dispose of the asset when he sees fit to do so. It is not uncommon for investors and families to hold on to their properties for over 100 years.

Demonstrate how location can influence the value of a specific property. [10]

Location is one of the most important aspects of real estate. When a valuer assess your property he will consider how close your property is allocated to certain amenities such as...

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