EXAMINATION FOR
127.241 PROPERTY MARKET PRINCIPLES
SEMESTER ONE 2019
SECTION A: Compulsory. All 30 multiple-choice questions should be answered. Each question is
worth 1.5 marks. Mark your answers on the InspiroScan Card provided.
1. All the following should be goals of the professional property manager except:
(a) 100% occupancy
(b) Generate income levels, by using the property assets in a more intense way than the Resource Consent for the property allows
(c) Enhance the quality of income to the owner
(d) Accomplish the owners’ objective
(e) All of the above are goals,a professional property manager should seek to obtain
2. Which of the following property type(s) is best valued using the income approach?
(a) A home
(b) An apartment
(c) A single unit in a block of three
(d) A block of three units together
(e) All of the above
3. A property in Jones Street has a weekly rental (net) of $850 per week, and the capitalisation (yield) rate is 7.5%. What is the value?
(a) $6,375
(b) $331,500
(c) $11,333
(d) $589,333
(e) None of the above
4. Another property in Smith Street is very similar to the Jones Street property. The only difference is that the Smith Street property is in superior condition. In terms of the capitalisation rate, what do you expect?
(a) The capitalisation rate will be higher for the Smith street property than the Jones Street property
(b) The capitalisation rate will be lower for the Smith street property than the Jones Street property
(c) The capitalisation rates will be the same for both properties
(d) The capitalisation rate will only be determined by interest rates
(e) None of the above
5. Which form. of tenure has Body Corporates specifically mentioned in relation to that form of title?
(a) Cross lease
(b) Freehold
(c) Unit title
(d) Company
(e) Timeshare
6. What is a risk of a ground leasehold (lessee’s interest) that is particularly notable in New Zealand as compared to other countries?
(a) The government may takeover the ground leasehold at anytime.
(b) The ground rent may rise above a level that the tenant can afford
(c) The government may make the ground leaseholder remove the house at anytime
(d) Ground leaseholds tend to be built on poor quality land that can slip away
(e) None of the above
7. What is the Curtain Principle, as described in this course
(a) Any estimate of value needs to draw from a wide variety of sources.
(b) Curtains are an essential part of house value
(c) The title is a complete and accurate reflection of all current rights and interests in the land
(d) Unregistered rights do not impact upon the new owners rights as the title register is a complete record
(e) The title reflects the state’s guarantee
8. The ownership document for land (title) is now under the Land Transfer Act (2017)and should now be more correctly known as?
(a) Record of title
(b) Computer register
(c) Notice of title
(d) Certificate of title
(e) None of the above
9. Jane buys houses to rent to tenants in order to make an income. In terms of New Zealand taxation legislation, what is Jane best described as?
(a) Developer
(b) Agent
(c) Investor
(d) Entrepreneur
(e) Dealer
10. James sells his 3-bedroom investment property 1 year after purchasing it. An approximate $100,000 profit is made on sale. Identify the correct statement.
(a) James needs to pay taxon the $100,000 profit, as it is less than the bright line period.
(b) James does not need to pay tax, as it is a sale of the family home
(c) James needs to pay tax as the transaction circumstances are irrelevant
(d) In general Inland Revenue will not check this type of transaction because it is below the $150,000 profit level threshold
(e) None of the above
11. When the Inland Revenue Department (IRD) considers if you should pay taxon a property sale, which of the following reasons does the IRD not consider?
(a) How long the seller owned the property
(b) The seller’s intention when the property was purchased.
(c) The place in New Zealand the property was purchased.
(d) The buying and selling history of the seller
(e) All of the above are considerations
12. Misrepresentation in real estate can relate to which of the following?
(a) What an agent says
(b) What an agent does not say
(c) The passing on of inaccurate information
(d) Statements made at social functions
(e) All of the above
13. What is the main aim of the Real Estate Agents Act 2008?
(a) To guide Real Estate agents on how to sell property in short time periods
(b) To guide Real Estate agents on sale methods such as auctions or by negotiation
(c) To help keep the real estate industry profitable
(d) To promote consumer confidence and consumer protection
(e) All of the above
14. Which organisation is most likely to have used eminent domain powers the most in New Zealand?
(a) Small-scale private land developers
(b) Large-scale private land developers
(c) Housing New Zealand
(d) Palmerston North City or Auckland Council
(e) All of the above organisations are free to use eminent domain powers.
15. Which of the following is one of the requirements to be a Real Estate agent in New Zealand
(a) Be of a good character
(b) Make one property sale within a calendar year
(c) Be over 21 years of age
(d) Have an approved property degree from a New Zealand University
(e) All of the above are requirements to be a real estate agent
16. High tenant turnover means increase for landlord in
(a) Advertising expenses
(b) Utility costs
(c) Depreciation in value of property
(d) Bad debts
(e) All of the above
17. Which principle or issue underlies the Resource Management Act the most?
(a) Cost effectiveness
(b) Affordability (for housing)
(c) Democratic participation
(d) Sustainability
(e) All of the above factors are equally important to the Resource Management Act
18. Madeline has the ability to drive her car over part of her neighbour’s driveway to access her
house. What is the name of the legal instrument that allows her to use the neighbours land for access?
(a) Caveat
(b) Covenant
(c) The district plan
(d) Easement
(e) A building line restriction
19. Which of the following is not a type of activity under the Resource Management Act?
(a) A permitted activity
(b) A non-complying activity
(c) An uncontrolled activity
(d) A discretionary activity
(e) A prohibited activity
20. What might you most likely find in a Land Information Memorandum (LIM) report?
(a) Certificate of title information, including caveats, encumbrances and easements
(b) Guidelines on how to pass Massey University examinations
(c) Information as to the credit worthiness of your client
(d) Information that the Council knows about a property including building consent information and zoning information.
(e) None of the above
21. Which of the following statement(s) indicate that real estate is not a perfectly competitive market?
(a) Property is a heterogeneous product
(b) Transaction costs are low
(c) Property is a homogenous product
(d) Pricing information is quickly disseminated amongst market participants
(e) All of the above indicate that real estate is not a perfectly competitive market
22. What does a ratchet clause do?
(a) Holds rents above the starting rent level in a commercial lease
(b) Requires developers to not fall below minimum building guidelines when developing new houses
(c) Requires Valuers or Quantity Surveyors not assess cost or value below their clients minimum requirement
(d) Ratchets building standards to the encumbrance or covenant in a subdivision
(e) None of the above
23. Applying the tax working group recommendations, how much income tax would you pay if you bought a house for investment purposes for $500,000, you sell it $900,000 and your marginal tax rate is 33%?
(a) $165,000
(b) $297,000
(c) $132,000
(d) $33,333
(e) None of the above
24. Which country has the highest rate of capital gains tax?
(a) New Zealand
(b) Brazil
(c) Ireland
(d) Denmark
(e) None of the above
25. What is the main purpose for Rating Valuation under the Rating Valuations Act 1998?
(a) To enable the settlement of insurance claims
(b) To help home buyers workout how much to pay for a house
(c) For the collection of a local government (council) tax
(d) To keep Valuers employed
(e) Rating valuations are traditionally provided by the government - there is no real reason
26. Corporate Real Estate (CRE), is most concerned with which of the following?
(a) Professional Valuers or Project Mangers wearing formal clothing to obtain a corporate look
(b) Taking the investment perspective when determining how to manage the property
(c) The management of large CBD office towers
(d) Taking the perspective of an organisations needs when determining how to manage the property
(e) None of the above
27. As per the International Valuation Standards (IVS) 2017, the Market Value states that the parties should act, in which way?
(a) Judiciously
(b) Carefully
(c) Without compulsion
(d) Optimistically
(e) Appropriately
28. Two formalways to measure property investment performance derived from finance theory are which of the following?
(a) ATV and ERR
(b) ATV and IRR
(c) NPV and IRR
(d) NTS and IRE
(e) NTS and ERR
29. Which of the following is not an advantage of indirect property investment?
(a) Better diversification
(b) Often a lower initial outlay
(c) Better liquidity
(d) More direct control over the property assets
(e) All of the above are advantages of indirect property investment
30. What is a Real Estate Authority (REA) compliant strategy for Real Estate Agents and Salespeople to earn money?
(a) Appraising (valuing) houses for banks and other financial institutions
(b) Purchasing their clients property and on selling for a profit
(c) By commission earned for listing and selling property or renting space
(d) Providing loans to their clients, charging interest to them above usual bank rates
(e) All of the above are REA compliant strategies for earning money