Real Estate Essay Example

  • Category:
    Business
  • Document type:
    Case Study
  • Level:
    Masters
  • Page:
    2
  • Words:
    1262

Introduction

All young graduates should think about their futures in terms of housing. They will work for a while and when they turn fifty, they have to make the decision of whether they still want to work or they want to retire. These graduates should review their lives, if they enjoy the work they do to continue working or invest in a portfolio which will probably grow over time. A twenty one year old graduate as a client should know where he or she stands financially in terms of an investment budget and future earnings prospects, and see what they can afford for any investments to be made. This client may still be living under the parent’s roof, and the decision to be made may depend on what choice they have at the present.

Analysis of the Perth real estate market

There has been an inevitable rise in the costs of property over the last decade. A conclusion has been reached by commentators that, there is a reasonably priced housing crisis in Perth real estate market. The concerns are inclined to rotate around the fact that there has been a depreciation of how houses are accessed through owning home openings by families that earn low or reasonable income. These families have been combined by a decreased affordability and the provision of personal rental and civic housing, correspondingly. It has been reflected that these factors have brought about a situation that a section of Australians undergo consequential amount of housing strain (Himmelberg et al., 2005). These kinds of responses have been famous of late, and have raised immense interest in owning homes. This growth has led to a lot of people making noise for enhancement in public finances to handle the claimed problems by the Federal Government.

Affordability problems seem to be a result of dominated government procedure, which has harshly compress the stock of low-priced properties. When brought together with demands for burgeoning the limits on supply lead to price increases. Families in Australia are putting efforts to improve ownership outlooks that center on distortions on order. If you look at the overall scenario of the Perth real estate market, people that bought property some time back are enjoying excellent capital growth while those that bought recently, at the end of the previous property boom, overspent financially and are suffering.

To advise a graduate on whether to invest in the Perth real estate market at this time or not, I will have to say that it is not a good idea. This is because it seems that the local financial system could be a beginning of a bit of decline for some time this year and probably into next year. I do concur that the long-term outlook for Perth are fine, the reserve sector has started to make progress, I see better prospect on the eastern coast. Some investors are getting back into the property sell this year because of the increase in rental returns and the vision that homes that have near to the ground prices have reached rock base of the market. Right now people are afraid of spend in advances in the stock market because of the financial state of affairs (The Menzies Research Centre, 2003). The rental yields have actually improved at Perth but people are showing more interest in the Brisbane property growth because of its growth capability.

Investment
Valuation of Returns and Selection of a Specific Real Estate

Valuation of returns can be determined using the cost approach whereby the prices of the land and the construction labor, material and all included costs are equal to the price of the current rates of the house on the market. This is usually applied to people who build and try to approximate the price of the property for a venture and discover a way to make a turnover.

Houses can be valued by using the price-to rent fraction. This is parallel to a price-to-earnings compound for stocks. This tries to show the relative price of possessing a house and renting one. When the cost of house is too high in relation to the rents, probable homebuyers will choose to rent houses than buy because it lowers the command for houses and brings the prices of the houses back into the same line with rental fee (The Menzies Research Centre, 2003). It is argued that when price –to-rent fraction remains elevated for an extended period of time, most probably the prices are maintained by illusory anticipation of future price increases instead of the essential rental value and hence may enclose a “bubble.”

The sales comparison advance is immense in valuing houses that are already on steady markets. The income approach is mostly used by investors that speculate to get to a market for a property. This is vital in evaluation of multi unit assets because one may not have a lot of sales compared to 35 unit of public housing in the same area.

How one appreciates the advance portfolio depends on the type of real estate one decides to put in. Real estate is a very good property class for assets generation. It has unique factors which are not found in other assets. These factors include limited supply which mostly enters real estate in a solid land element which is distinct from a public housing in a sky-scraping rise building. The physical existence of the real estate is tangible compared to paper asset category. The demand for a house is high because people want to have a roof over their heads. They cannot live without this for it is compulsory. Leverage can allow one to have access to more sections of purchase price of a part of real estate property than for any other possessions class (Himmelberg et al., 2005). Price inflation makes the attribute to have power of real estate from any asset building point. If the economy is unwavering not exposed to inflation and a rise in population, in your put in the value of the real estate grows steadily at high rates in the future.

Conclusion

Armed with all the information provided for the graduate I would recommend that she tries to look into other real estate markets for a better deal than the one being provided by Perth real estate markets. The amount of money she has for the portfolio is not enough for the graduate to start the investment in the Perth real estate market. The investment of $400 investment to the portfolio in a month may not bring out the estimated profits of the real market prices in future if the investment is made now. I would highly recommend that they look at other real estate markets that may suit money that the graduate has or even better, the graduate can live at the parents house till they save enough a new portfolio that will give them more profits. They can save and if they still prefer to invest in the Perth real estate markets after some time when the local financial system has elevated form what it is now. The graduate should not rent an apartment for now because the client can save up the money supposed to be paid as rent to invest in a real estate that has more value later on and which has coincided with a rise in the local asset system.

References

Himmelberg, C., Mayer, C. and Sinai, T. (2005). Economic development perspectives. Journal of Economic Perspectives, Vol19. No.4

The Menzies Research Centre, (2003). Innovative Approaches to reducing the cost of ownership. Oxford University: Oxford University Press.