Real Estate Market & Characteristics: RES exam practice questions

In real estate, “land” refers to __________.

1. Athe surface of the earth only, excluding anything built on it
2. Bthe surface of the earth, anything permanently attached to it, the airspace above and the substances below
3. Cthe surface of the earth together with any buildings and any furniture or equipment the owner places there
4. Donly the land area shown in the title plan, excluding buildings and airspace

According to the law of demand, if all other factors remain equal, when the price of property rises, __________.

1. Athe quantity demanded falls
2. Bthe quantity demanded rises
3. Cthe quantity supplied falls
4. Ddemand is unaffected because housing is a necessity

Which of the following is a factor, other than price, that changes the demand for housing?

1. AConstruction technology
2. BPopulation
3. CNumber of developers
4. DPrices of building materials

Which of the following is a micro factor affecting the price of a particular property?

1. AIts distance from the nearest MRT station
2. BThe rate of population growth
3. CThe amount of land released under the GLS programme
4. DThe level of employment in the economy

A sudden rise in real estate prices within a short period is called a __________.

1. Aboom
2. Brecovery
3. Cdownswing
4. Ddepression

The real estate market is described as an imperfect market mainly because __________.

1. Aproperty prices are fixed by the government and cannot be negotiated freely
2. Beach transaction must first be approved by URA before it can be completed
3. Cproperties of the same type in an estate are always sold at the same price
4. Dinformation is often incomplete and there is no central trading place

Mr Lim Boon Keat, 48, a Singapore Citizen, owns a freehold three-bedroom condominium unit in District 15 with his wife, Mdm Siti Rohani. A business partner in Johor has invited him to invest $300,000 in a new venture and needs the money within six weeks. Mr Lim tells you that his previous agent once told him that a well-located condo “can be sold in a weekend”, so he plans to list the unit on Monday and use the proceeds. You explain that, even if a buyer is found this week, it will usually take another 2 to 3 months before the sale is completed and he actually receives the money. Mr Lim also mentions that his outstanding loan is small and that his neighbour sold a similar unit last year at a good price.

Which characteristic of real estate BEST explains why Mr Lim may not have the sale proceeds in hand by the time his partner needs the money?

1. AIlliquidity, because even after a buyer is found, the due diligence and completion of the sale usually take a further 2 to 3 months
2. BIndivisibility, because he has to sell the whole unit and cannot sell off part of it to raise the smaller sum that the business needs
3. CHeterogeneity, because every unit is unique, so buyers must first compare his unit with others before they will agree on a price
4. DLong-term management, because owners face recurring costs such as maintenance and property tax that must be kept up during a sale

Maple Residences, a 300-unit condominium in Pasir Ris, still has 60 unsold units a year after launch. To clear its remaining stock, the developer lowers its average price from $2,000 psf to $1,800 psf, while keeping the same marketing budget and showflat opening hours. Interest rates, household incomes and the number of competing launches nearby all stay the same during this period, and nothing else in the market changes. In the following month, the developer sells considerably more units than before. A colleague, Mr Raj Kumar, who has been selling in the area for ten years, tells you that this clearly shows an increase in demand for homes in Pasir Ris.

In economic terms, the higher number of units sold in the following month is BEST explained by __________.

1. Aan increase in demand, caused by buyers becoming more willing and able to buy at every price level
2. Bthe law of supply: other things being equal, a lower price leads to a higher quantity being supplied
3. Cthe law of demand: other things being equal, a lower price leads to a higher quantity being demanded
4. Da shortage in the market, caused by the time lag that developers face in building new supply

Over the past five months, prices in several suburban condominium projects have jumped sharply. Many buyers are buying two or three new units each, intending to resell them quickly, and most of them are taking large loans. Banks are lending generously based on high valuations. Your client, Mr Chan Kok Wai, 41, an engineer who already owns an HDB flat in Ang Mo Kio, tells you that his colleague has doubled his money in a year. He says, “Prices can only keep going up, so I want to buy three units now, before the next launch in Tampines.”

Which is the BEST response to Mr Chan’s claim that prices can only keep going up?

1. ABank valuations reflect true market value, so the rise will last for as long as banks remain willing to keep lending generously
2. BSpeculative buying is not real demand; it can draw in supply and end in oversupply, and heavy borrowing can end in bad debts
3. CSpeculators add genuine demand, so supply will not be able to catch up and prices will keep on rising for some years to come
4. DThe rise will end only if the government stops selling land to developers, since land supply is what drives prices in a boom

Mr Hamid bin Osman, 45, a Singapore Citizen who runs a logistics firm, has $200,000 of savings and wants to invest in the hotel sector, which he believes will benefit from rising tourist arrivals. He asks you to help him buy one room in a hotel near Orchard Road so that he can earn rental income from it. He says he is willing to pay in cash so that the purchase can be done quickly, and that a friend in Kuala Lumpur owns a hotel room there. He also mentions that the hotel has a row of shops on its first storey that he likes.

Which of the following should the salesperson NOT tell Mr Hamid about his plan?

1. AA single hotel room cannot be bought on its own, because planning regulations do not allow hotel rooms to be strata subdivided
2. BServiced apartments are treated in the same way, so a serviced apartment likewise cannot be strata subdivided and sold singly
3. CA hotel’s commercial component, such as its shops, also cannot be strata subdivided, so none of its shops can be bought singly
4. DIf he wants exposure to the hotel sector with his savings, he could consider buying units in a REIT that owns hotels instead