Section A: 1. List four mundane considerations buyers of residential real estate consider.

-the relationship between a homeowner’s outstanding mortgage debt and the market price of the property
-the authenticity in residential real estate demand
-Fixity of location
-High construction cost of buildings

2. As

3. Sad

4. Sad

5. Why is supply of land said to be inelastic?

Land is inelastic because the real estate market is a monopolistic competition, it has many buyers and sellers, and each seller offer slightly different versions of the same good. For example in real estate, there are usually substitute locations to choose from and possibly at a lower land cost to the investor. Therefore, the percentage change in the quantity of land supplied will always be smaller than the percentage change in land price.

6. How does the Proposed Auckland Unitary Plan (PAUP) aim to increase the elasticity (produce imperfect inelasticity) of land in the city?

7. Why do some commentators question the meaningfulness of talking about a single housing market? Explain and give examples in your answer.

8. How can real estate function as an asset and be compared with other types of assets like shares, bonds, and money for example?

Section B: Calculating investment performance, risk and uncertainty

a) Assess the net income

Gross Income $32,000 less expenses $4,675 less allowance of two weeks vacancy ($32,000/52*2)=$1231 less 8% of gross income for property management (0.08*$32,000)=$2560 -$ 8,466

Net Income $23,534

b) Assess the investment return (without taking borrowings into account)

R= i/v
= $23,534/$965,000
= 2.44%

c) Assess the income taking borrowing into account

Add mortgage repayment to expenses ($200,000*0.0495)= $9,900 p.a.
Total expense for the investor=