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Chapter 18: Property

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asked Oct 12 in BUS 1003H - Introduction to Financial Risk by Ireneus (410 points)

Why is a unique item e.g property, less marketable and what does the uniqueness of property really mean?

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answered Nov 12 by Richard van Gysen (3,020 points)
selected Nov 19 by Richard van Gysen
 
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Also adding on to this uniqueness of each property type, you get other reasons why it is not marketable:

1) Large size. To buy or own one property requires a large sum of capital to invest which many people cannot afford and thus there are few market participants in the property market. This is largely due to the indivisibility of property as it can't be broken up into pieces (one big unit).This low volume o trading leads to the risk that a property asset cannot be traded when needed unless sold at a major discounted price.

2) Subject valuation. There is no formal exchange or market for property. This makes it difficult to determine the price for a property and leads to many disagreements between buyers and sellers. People require expert estimates which can be expensive in order to find the value of their property. Thus, many deals don't occur due to differing opinions about the price. On a formal exchange like equities, it's easy to read the market price off the screen.

3) Uniqueness (explained above).

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answered Oct 13 by Dumie Nyathi (260 points)

Unique with regards to property means that no two properties are alike, and as such the value of each is unique to that particular property. So to sell property you would have to find someone who wants that particular property with the features that it has,which is not an easy task compared to selling something that is standardised like a phone for example, hence uniqueness of property makes it less marketable.

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