Finance of Real Estate

National University of Singapore Department of Real Estate School of Design and Environment AY 2013/2014, Semester I RE1101: Fundamentals of Real Estate Finance Tutorial 1 1. Refer to the following articles: i. Putting money into bonds ii. An alternative investment avenue iii. An eye on equities iv. Playing your cards right a) Give a concise summary of the articles. Be sure to give a clear explanation of the financial terms mentioned in the articles. b) Name three public debt products and three public equity products (real estate related) that are currently listed on the Singapore Stock Exchange. [Hint: Check out www.sgx.com] For the products listed, give a brief summary of the issuer, current market price and product description. Discuss the advantages and disadvantages of buying a debt product over an equity product. c) Name three financial innovations related to the real estate market. Discuss how they have affected the overall functioning of the real estate market. 2. a) How is a financial asset (a government bond) different from a tangible asset (an apartment)? b) Why are financial instruments like IOUs? Explain why financial instruments are assets for savers but liabilities for borrowers. c) Indicate whether each of the following instruments trade in the money market or the capital market: (i) Temasek Holdings issues bonds worth $1billion with a 40-year tenor. (ii) Microsoft Corporation issues common stock. (iii) JTC Corporation issues a financial instrument with eight months to maturity. d) What is the basic principle in determining the price of a financial asset? Why is it difficult to determine the cash flow of a financial asset? e) What are the three major factors influencing property prices or capitalization rates in the real estate asset market? Discuss how the following factors influence capitalization rates: i. Increase in interest rates ii. Decrease in property rents iii. Increase in property prices iv. News of an impending market downturn v. News of...