Are Asian Economies headed for a Repeat of the 1997 Asian Financial Crisis?
Slowdown in China There has been a noticeable slowdown in the Chinese economy over the last few months. Coupled with a draining of the excess liquidity that was introduced into the economy through massive monetary stimulus in the wake of the global economic crisis, the Chinese economy suddenly looks vulnerable. Added to this is the […]
The Hong Kong Housing Problem
Hong Kong has been ranked as the most expensive city to live in. Survey after survey has found that the housing prices in Hong Kong are simply unaffordable. On an average, the median income to housing price ratio is more than 18. This means that a person would have to save for 18 years straight […]
Why Property Prices are Crashing in Every Major City in the World?
In the decade after the Great Recession of 2008, property prices have risen by leaps and bounds. In many places around the world, property prices grew by a multiple of 10 on the back of loose monetary policies which had become rampant all across the globe. Many speculators have been buying apartments and houses on […]
Inflation and Wealth Redistribution
We have already ascertained that inflation is a hidden tax. It is a discretionary power that governments have at their disposal to tax the people without their consent. However, that is not what makes inflation public enemy number 1 as far as economics is concerned. Not only is inflation an unjustly applied tax but when […]
Famous Cases of Hyperinflation
The common perception amongst lay people is that hyperinflation is the economic equivalent of a doomsday. True, that the consequences are dire and the threats are real. But this sort of stuff almost never happens, does it? This is the opinion that the common public holds when they are confronted with the issue of hyperinflation. […]
Accurate and reliable real estate valuations are difficult to obtain. As a result, gauging whether a property investment has turned out to be profitable is also not a straightforward process. There are a number of indices that an investor must keep a track of, in order to understand the current situation of their investment and make effective decisions accordingly. This article provides an overview about performance measurement in the real estate sector.
Valuation of liquid assets such as stocks and bonds is easy. This is because they have a precise listed price. This price is quoted on an exchange every few seconds and anyone can transact at the quoted prices. However, this is not the case with real estate! Real estate prices are opaque and it takes significant effort and time to unearth both the rental and capital values of real estate. The true value of the particular property is only realized when it is the subject of a transaction.
Since all properties are unique (i.e. not homogenous), there cannot be a standard price in the market that is applicable to all investment units. As such, real estate investors have to look at a variety of measures just to find out whether the value of their investment is doing well! Here are some of the common ways that investors resort to in order to gauge the success or failure of their investments.
In case, the investor does not intend to liquidate the property but rather hold it for some more time, the investor can look at some of these measures to understand the performance of his/her investment better.
Thus, these investors keep a track of their monthly mortgage payments which include interest as well as principal payments and then use the market price to determine whether or not the equity that they have built in the house is greater than the expense that they have incurred as a result of holding on to the house.
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