Real Estate Finance
Dr. K. S. Tse, University of Hong Kong, Fall 2003
E-mail: ktse@econ.hku.hk
Course Objectives:
Real Estate represents a large fraction of the world's wealth. Its efficient utilization and the markets
in which it is traded involve many interesting and complex economic and policy issues. A proper
understanding of the real estate market is important for individuals to make sound savings and
investment decisions, for businesses to make the right decision on whether to buy or lease a property,
and important for banks to evaluate the asset risks underlying their mortgage loan portfolios and to
innovate real estate related financial products. The objective of this course is to develop an analytical
framework by which students can make sound real estate investment decisions. The main emphases
of the course are on theory, concept building, financial modelling, and practical application. In
particular, class discussions will cover the following areas in real estate:
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Real estate markets and investments, appraisals, and development
Institutional aspects of real estate finance
Optimal financing strategies for Real Estate
Mortgage Markets, Mortgage-Backed Securities, and Real Estate Investment Trusts (REITs)
Real Estate Transactions
Valuation of Land
Valuation of Income Producing Properties and Redevelopment of Real Estate
Materials and data pertaining to local real estate market will be used throughout the course whenever
possible.
Text and Reading Materials:
There is no required text book for this course. Reading materials for all topics will be handed out in
class as well as put on reserve at the HKU library. Students are responsible for all materials.
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References: Real Estate Finance and Investments, Bruggeman and Fisher, 9th Edition, Irwin.
Required Tool:
A standard financial calculator such as TI BA35 and HP 12C.
Grading Policy:
The course grade will be based on tutorial discussions on local real estate market, take-home
assignments, and a semester-end exam. The point distribution is as follows:
Tutorial Participation and Discussion
Take Home Assignments
Semester-End Final Exam
20%
20%
60%
Problems sets will be assigned, but some will not be collected and therefore not graded. The purpose
of the assignments is to assist you in reviewing the materials and preparing for the exams. Details
about the requirements for the case reports will be given shortly after the semester starts.
Date
Sep 09
Sep 11
Sep 16
Sep 18
Sep 23
Sep 25
Sep 30
Oct 02
Oct 07
Oct 09
Oct 14
Oct 16
Oct 21
Oct 23
Oct 28
Oct 30
Nov 04
Nov 06
Nov 11
Nov 13
Nov 18
Nov 20
Nov 25
Nov 27
Dec 02
Dec 04
Reading
Assignments
Topic
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Tue
Thur
Introduction
Hong Kong Property Market
Capital and Property Market
Financing Residential Properties
Financing Residential Properties
Financing Residential Properties
Mortgage-Related Backed Securities
Mortgage-Related Backed Securities
Mortgage-Related Backed Securities
Mortgage-Related Backed Securities
Real Estate Auctions in Hong Kong
Real Estate Auctions in Hong Kong
Reading Week
Reading Week
Real Estate Auctions in Hong Kong
Real Estate Auctions in Hong Kong
Pre-Sale Transactions
Pre-Sale Transactions
Default Risk in Real Estate Transaction
Default Risk in Real Estate Transaction
Valuation of Income Properties
Land Valuation
Land Valuation
Land Valuation
Valuation of Redevelopment of Income Properties
Valuation of Redevelopment of Income Properties
Lecture notes
Lecture notes
Lecture notes
Lecture notes
Lecture notes
Lecture notes
Lecture notes
Lecture notes
RM1, RM2
Lecture notes
Reading Materials
RM1:
Jeffrey Fisher, George Lentz, and K.S. Tse, “Valuation of the Effects of Asbestos on
Commercial Real Estate.”
RM2:
George Lentz and K.S. Tse, “An Option Pricing Approach to the Valuation of Real
Estate.”
Tse 2