1. Aims
The overall aim is to provide students with the opportunity to investigate in depth issues concerning property appraisal.
2. Learning Outcomes
On completion of the project the student should:
a) have gained detailed knowledge of the issues addressed;
b) have gained improved understanding of the appraisal process;
c) be able to relate hypothetical examples to theory.
3. The Assessment
Provide a 2,000 word essay on the following topic:
‘The securitisation of property assets can lead to more liquidity in property markets but also creates problems of risk appraisal of the underlying asset.'
Discuss these problems in the light of issues that have arisen in recent global financial crises.
PROPERTY APPRAISAL COURSEWORK
‘The securitisation of property assets can lead to more liquidity in property markets but also creates problems of risk appraisal of the underlying asset.'
Discuss these problems in the light of issues that have arisen in recent global financial crises.
Background
The facts? The context?
Need to define securitisation and its context:
- Securitisation is the creation of tradable securities from a property asset
- Unitisation is also the creation of a tradable security but the aim in this case is to parallel a return comparable to direct ownership
Then look at problems of the illiquidity of property assets and how securitisation deals with this. Issues related to taxation and marketability have now been solved by new securitised investment vehicles. But problems of mixing portfolios of assets and income streams from those assets have created new risks which are difficult to calculate and this has become more evident in the new global economic climate
Give a brief overview of the development of these vehicles in the global economic context.
Analysis and discussion:
Give more detail on types of securitisation, say debt versus equity securitisation.
The debate: look at benefits and the necessity of securitisation in some cases as against the problems.
Benefits of securitisation
- Provides liquidity in market
- Assists in diversifying risk
- Avoids management of property
- Provides tax transparency
- Provides more flexible financial structure
Summary - securitisation is necessary because of:
- Lack of liquidity - property can't sell easily
- Problems of valuing the property
- Property is too large to fit into portfolios
- Need to sell all, can't break it up
- Costs of transfer and management Problems of securitisation
- Can't tell the quality of the underlying asset
- Can't tell the quality of the underlying cash flow, the status of the borrower
- Thus difficulties in the analysis of the risk
- If one portion of securitized vehicle is risky, it infects all, all become toxic assets.
Relate these issues to the problems of assessing risk and liquidity in the economy in general and the property sector in particular that has ended in a lack of liquidity and risk in mortgage securitisation and in general in the banking sector.
Conclusions:
The outcome of the debate, ensure you allow enough discussion of the summary related to the debate. Point up particular issues.
Structure and presentation:
The structure: Structure the work with an introduction, main points and conclusion. The introduction should indicate clearly what you intend to do in the essay and provide appropriate definitions of key terms such as liquidity, securitisation and global economic crisis. For the main discussion, choose 3 or 4 main points about the liquidity of assets and relate them to the economic context. The conclusion should be related to the economic context and include and limitations to you study or recommendations for further analysis.
The presentation: The work should have a frontispiece and contents page. There should a list of reference at the end of the work. The structure should be rational and provide separate sections to enable the progress of the discussion/debate to be understood by the reader.
References: Ensure the referencing of sources, books, journal articles, websites and professional journals are all done correctly in accordance with the Harvard approach. 15% of the marks are for referencing correctly, appropriately and informatively.
COURSEWORK ASSESSMENT 1: ESSAY
This assessment will contribute to 50% of the overall marks for the course.
1. Aims
The overall aim is to provide students with the opportunity to investigate in depth issues concerning property appraisal.
2. Learning Outcomes
On completion of the project the student should:
a) have gained detailed knowledge of the issues addressed;
b) have gained improved understanding of the appraisal process;
c) be able to relate hypothetical examples to theory.
3. The Assessment
Provide a 2,000 word essay on the following topic:
‘The securitisation of property assets can lead to more liquidity in property markets but also creates problems of risk appraisal of the underlying asset.'
Discuss these problems in the light of issues that have arisen in recent global financial crises.
4. Method of Work
Students should bring to the notice of tutors any problems encountered, preferably prior to submission.
5. Format of Submission
Submissions must be typed in A4 format, double spaced, with an appropriate cover sheet and submitted through the Turnitin submission access on the Moodle page for the course. Submissions should be a maximum of 2,000 words. The paper must be fully referenced; the Harvard system of referencing is to be used. Please ensure that the essay is properly structured and all technical terminology appropriately explained.