20 18 operational management of real estate appraisers: real estate investment risk

20 18 operational management of real estate appraisers: real estate investment risk

Section 3 Real Estate Investment Risks

Two, eight systemic risks of real estate investment (important test sites)

Systematic risk is also called non-dispersible risk or market risk, that is, the part of the risk in the portfolio that cannot be dispersed or offset. There are mainly inflation risk, market supply and demand risk, cycle risk, liquidity risk, interest rate risk, policy risk, political risk and contingent loss risk.

In 2007, systemic risk refers to the part of individual investment risk that can be dispersed and offset in the portfolio. ( )

Answer: × See the textbook P 17.

Inflation risk

Inflation risk, also known as purchasing power risk, refers to the risk that the purchasing power of funds recovered after investment is lower than the initial investment. Investors will face purchasing power risk if they get income through others' installment payment. Because inflation will lead to the decline in the value of future income, investors who rent real estate at long-term fixed rent actually bear the risks that should be borne by the lessee. The longer the lease term of a fixed-rent property, the greater the purchasing power risk that investors bear.

Because inflation risk directly reduces the real rate of return on investment, real estate investors will reduce the impact of this risk on the real rate of return by appropriately adjusting (increasing) the minimum rate of return (nominal rate of return) they require. However, due to the preservation of real estate investment, the minimum rate of return required by investors is not the direct sum of inflation rate and industry benchmark discount rate. (difficulty)

Historians' explanation:

1. Minimum rate of return required by investors (nominal rate of return) R >；; The inflation rate r tong +Real rate of return r is simply deduced as follows: According to the formula of textbook 187 cases of 6-3, we can know that: 1+R name =( 1+R tong) (1+R real), and we can get: r name =R tong +R real after sorting out.

2. Minimum rate of return required by investors (nominal rate of return) r

Since the average annual growth rate of real estate prices usually exceeds the inflation rate in the same period, investors can tolerate a lower rate of return on investment, and the minimum rate of return required by investors can be slightly lower than the sum of inflation rate and industry benchmark discount rate.

20 12 Among the following real estate investment risks, the systematic risk that directly leads to the decline in the actual return on investment is ().

A. Time risk

B. Relative risk

C. Holding period risk

D. Inflation risk

Answer: d See the textbook P 18.

(B) Market supply and demand risks

Market supply and demand risk refers to the risk brought to investors by the change of supply and demand relationship in the real estate market in the investor's region. The market is constantly changing, and so is the relationship between supply and demand in the real estate market. The change of supply and demand will inevitably lead to the fluctuation of real estate prices, which is manifested in the change of rental income and real estate value, thus leading to the actual income of real estate investment deviating from the expected income.

Cyclic risk

Cyclical risk refers to the risk brought to investors by periodic fluctuations in the real estate market. The cyclical fluctuation of the real estate market can be divided into four stages: recovery and development, prosperity, crisis and recession, and depression.

(d) Liquidation risk

Liquidation risk refers to the risk of capital loss caused by discount when goods are eager to be converted into cash.

(5) Interest rate risk (difficulty)

The increase of interest rate will have two effects on real estate investment: first, it will lead to the loss of real estate value, and the financial net present value of investment projects will decrease or even be negative by discounting cash flow with the increase of interest rate; Second, it will increase the debt burden of investors and make it difficult to repay loans. The increase in interest rates will also curb the demand in the real estate market, leading to a decline in real estate prices.

Historians' interpretation: interest rates are negatively correlated with real estate prices in general: interest rates rise and real estate prices fall. In the current seller's market, interest rates rise, increasing development costs, but developers can pass it on to buyers to push up housing prices; However, raising interest rates will curb demand and lead to a decline in real estate prices. On the whole, raising interest rates has a greater impact on the latter. It is suggested to study the interest rate in the fifth section of Chapter 4 of the theoretical textbook.

(vi) Policy risks

The government's land supply policy, tax and fee policy, financial policy, housing policy, price policy, environmental protection policy, etc. It has a great impact on the realization of the income target of real estate investors, thus bringing risks to investors. The most effective way to avoid this risk is to choose projects encouraged by the government and projects with guaranteed income or preferential tax policies for investment.

Historians interpret: The reason of policy risk is that real estate investment is easily influenced by policies.

(vii) Political risks

The immovability of real estate makes real estate investors bear considerable political risks. This is the most harmful risk in real estate investment.

(8) Risk of contingent loss ("contingent" means "accidental" rather than "inevitable")

The risk of contingent loss refers to the loss of family investment caused by fire, wind or other unexpected natural disasters. Investors can transfer some risks to insurance companies.

In 2007, the following risks belong to the system risk ().

A. Relative risk

B. Market supply and demand risks

C. Risks of future operating expenses

D. Holding period risk

Answer: b

Analysis: Comparative risk is also called opportunity cost risk. It should be remembered that various risks have different names, such as inflation risk, which is also called purchasing power risk.

In 2006, the impact of raising the loan interest rate on the real estate market mainly includes ()

A. leading to a decline in the real value of real estate

B. leading to the increase of real estate value.

C. Increasing the debt burden of investors

D. Restrain the demand of the real estate market

E. Increasing the demand of the real estate market

Answer: ACD

Analysis: From the comprehensive effect, the impact of interest rate fluctuation on real estate demand is greater than that on real estate supply, so the real estate price is negatively correlated with interest rate: interest rate rises, real estate price falls, interest rate falls, and real estate price rises (theoretical textbook 146).