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Introduction : Investment in property and land
 

Introduction : Investment in property and land

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  • Demographics (size amount of home, age structure, occupation, gender, and marital status.), Psychographic (mental nature of society,: personality, lifestyle, and taste) <br />
  • ijin membuat bangunan ( IMB), persyaratan sanitasi dan kesehatan, ketentuan penghunian kondominium atau rumah susun , perjanjian sewa menyewa. <br />

Introduction : Investment in property and land Introduction : Investment in property and land Presentation Transcript

  • Investment in Property and Land Eunike Yuliana Febrina Dialusi H S Maria Felicia Micha Paramitha Petty Tunjung Sari
  • Introduction
  • Definition – Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for: • use in the production or supply of goods or services or for administrative purposes; or • sale in the ordinary course of business. – Owner-occupied property is property held (by the owner or by the lessee under a finance lease) for use in the production or supply of goods or services or for administrative purposes.
  • Definition (cont.) • A property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property if, and only if, the property would otherwise meet the definition of an investment property and the lessee uses the fair value model for the asset recognised. – This classification alternative is available on a propertyby-property basis. However, once this classification alternative is selected for one such property interest held under an operating lease, all property classified as investment property shall be accounted for using the fair value model and all required disclosures should be made.
  • An entity may make the foregoing classification on a property-byproperty basis 1. Recognition •Investment property shall be recognised as an asset when, and only when: a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and b) the cost of the investment property can be measured reliably.
  • 2. Measurement Initial measurement • An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement. • The initial cost of a property interest held under a lease and classified as an investment property shall be as prescribed for a finance lease, i.e. the asset shall be recognised at the lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount shall be recognised as a liability.
  • Subsequent measurement • An entity can choose as its accounting policy either the fair value model or the cost model and shall apply that policy to all of its investment property. • After initial recognition, an entity that chooses the fair value model shall measure all of its investment property at fair value, except for when the fair value of the investment property is not reliably determinable on a continuing basis. This arises when, and only when, comparable market transactions are infrequent and alternative reliable estimates of fair value are not available. Then, an entity shall measure that investment property using the cost model in IAS 16. The residual value shall be assumed to be zero. The entity shall apply IAS 16 until disposal of the asset. • When a property interest held by a lessee under an operating lease is classified as an investment property, treatment is not elective. The fair value model is to be applied.
  • • A gain or loss arising from a change in the fair value of investment property shall be recognised in profit or loss for the period in which it arises. • The fair value of investment property shall reflect market conditions at the balance sheet date. • If an entity has previously measured an investment property at fair value, it shall continue to measure the property at fair value until disposal (or until the property becomes owner-occupied property or the entity begins to develop the property for subsequent sale in the ordinary course of business) even if comparable market transactions become less frequent or market prices become less readily available. • If an entity chooses the cost model, it shall measure all of its investment property in accordance with IAS 16’s requirements.
  • 3. Transfers • Transfers to, or from, investment property shall be made when, and only when, there is a change in use, evidenced by: a) commencement of owner-occupation, for a transfer from investment property to owner-occupied property; b) commencement of development with a view to sale, for a transfer from investment property to inventories; c) end of owner-occupation, for a transfer from owneroccupied property to investment property;
  • d) commencement of an operating lease to another party, for a transfer from inventories to investment property; or e) end of construction or development, for a transfer from property in the course of construction or development (covered by IAS 16) to investment property.
  • 4. Disposals • An investment property shall be derecognised (eliminated from the balance sheet) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. • Gains or losses arising from the retirement or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognised in profit or loss in the period of the retirement or disposal. • Compensation from third parties for investment property that was impaired, lost or given up shall be recognised in profit or loss when the compensation becomes receivable.
  • 5. Disclosure Fair Value Model and Cost model • An entity shall disclose: a) whether it applies the fair value model or the cost model. b) if it applies the fair value model, whether, and in what circumstances, property interests held under operating leases are classified and accounted for as investment property. c) when classification is difficult, the criteria it uses to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of business.
  • Fair Value Model and Cost model d) the methods and significant assumptions applied in determining the fair value of investment property. e) the extent to which the fair value of investment property is based on a valuation by an independent value. If there has been no such valuation, that fact shall be disclosed. f) the amounts recognised in profit or loss for: i. rental income from investment property; ii. direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period; and iii. direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income iv. the cumulative change in fair value recognised in profit or loss on a sale of investment property
  • g) the existence and amounts of restrictions on the reliability of investment property or the remittance of income and proceeds of disposal. h) contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.
  • Fair Value Model • In addition to the common disclosures, an entity that applies the fair value model shall disclose a reconciliation between the carrying amounts of investment property at the beginning and end of the period, showing : a) additions, disclosing separately those additions resulting from acquisitions and those resulting from subsequent expenditure recognised in the carrying amount; b) additions resulting from acquisitions through business combinations; c) assets classified or included in a disposal group classified as held for sale; d) net gains or losses from fair value adjustments; e) the net exchange differences arising on translation of financial statements into a different presentation currency, and on translation of a foreign operation into the presentation currency of the reporting entity; f) transfers to and from inventories and owner-occupied property; and g) other changes.
  • Fair Value Model • When a valuation obtained for investment property is adjusted significantly for the purpose of the financial statements, the entity shall disclose a reconciliation between the valuation obtained and the adjusted valuation included in the financial statements, showing separately and any significant adjustments. • In exceptional cases, when an entity can only measure investment property using the cost model in IAS 16, the reconciliation shall disclose amounts relating to that investment property separately from amounts relating to other investment property. Plus, an entity shall disclose: a) a description of the investment property; b) an explanation of why fair value cannot be determined reliably; c) if possible, the range of estimates within which fair value is highly likely to lie; and d) on disposal of investment property not carried at fair value: i. the fact that the entity has disposed of investment property not carried at fair value; ii. the carrying amount of that investment property at the time of sale; and iii. the amount of gain or loss recognised.
  • Cost Model • In addition to the common disclosures, an entity shall disclose: a) b) c) d) the depreciation methods used; the useful lives or the depreciation rates used; the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at beginning and end of the period; a reconciliation of the carrying amount of investment property at the beginning and end of the period, showing the following: i. additions, disclosing separately those additions resulting from acquisitions and those resulting from subsequent expenditure recognised as an asset; ii. additions resulting from acquisitions through business combinations; iii. assets classified as held for sale or included in a disposal group classified as held for sale in accordance with IFRS 5 and other disposals; iv. depreciation; v. the amount of impairment losses recognised, and the amount of impairment losses reversed, during the period in accordance with IAS 36; vi. the net exchange differences arising on the translation of the financial statements into a different presentation currency, and on translation of a foreign operation into the presentation currency of the reporting entity; vii. transfers to and from inventories and owner-occupied property; and viii. other changes; and
  • Cost Model e) the fair value of investment property. In the exceptional cases, when an entity can only use the cost model because it cannot determine the fair value of the investment property reliably, it shall disclose: i. a description of the investment property; ii. an explanation of why fair value cannot be determined reliably; and iii. if possible, the range of estimates within which fair value is highly likely to lie.
  • Examples of investment property: • • • • land held for long-term capital appreciation land held for undetermined future use building leased out under an operating lease vacant building held to be leased out under an operating lease • property that is being constructed or developed for future use as investment property
  • Background of Study
  • Investment is a term for several closely related meanings in finance & economics. What is What is Investment Investment ??? ??? Investment means the production of capital goods - goods which are not consumed but instead used in future production. Investment means the investing of money.
  • Classification of Classification of Investment Investment Physical Physical Investments Investments Financial Investment Financial Investment Marketable Investments • • • • Shares Stock Exchange Bonds of Public Sector Units Government Securities, Non- Marketable Investments • • • • • • • Bank Deposits Provident and Pension Funds Insurance Certificates Post office Deposits National Saving Certificates Company Deposits Private Companies Shares
  • The parties undertake investment activities called investors.
  • NEED AND IMPORTANCE OF INVESTMENTS
  • •• Welfare is indicated by the sum of monetary income is currently Welfare is indicated by the sum of monetary income is currently owned and the current value (present value) of future income. owned and the current value (present value) of future income. •• People should make a decision as to how much current income People should make a decision as to how much current income that should be spent or consumed and how much should be that should be spent or consumed and how much should be invested according to his preference. invested according to his preference. Our income which is not consumed is saved and invested. Our income which is not consumed is saved and invested. Investments are also useful for present and future consumption in Investments are also useful for present and future consumption in the case of consumer durables, cars, gold and silver etc. the case of consumer durables, cars, gold and silver etc. But investment generally promote larger consumption in future as But investment generally promote larger consumption in future as they lead to more income and larger capital appreciation in the they lead to more income and larger capital appreciation in the years to come. years to come.
  • PROPERTY The rigths that one individual has in lands or goods to the The rigths that one individual has in lands or goods to the exclusion off all others, rigths gained from the ownership of exclusion off all others, rigths gained from the ownership of wealth wealth
  • Land rights can be divided into two Land rights can be divided into two categories: categories: Adat Land (Customary Land) • Not registered with the relevant land office (Badan Pertanahan Nasional or National Land Agency). • Usually held through a traditional joint community ownership structure. • Rights held under this category can be converted to certified titles. Certified Land Title is governed by the Basic Agrarian Law of 1960 and is registered at the local land office.
  • There are basically five types of land rights There are basically five types of land rights held under the Agrarian Law: held under the Agrarian Law: Rights of Ownership Rights of Exploitation Rights to Build Rights of use Rights to operate
  • There are basically five types of land rights held under There are basically five types of land rights held under the Agrarian Law: the Agrarian Law: Rights of Ownership • Absolute ownership of land - this corresponds to a fee simple or freehold title in common law jurisdiction. • This right is hereditary and held only by Indonesian citizens. • Can be sold, transferred, bequeathed or hypothecated (mortgaged).
  • There are basically five types of land rights held under There are basically five types of land rights held under the Agrarian Law: the Agrarian Law: Rights of Exploitation • Right to cultivate or exploit state-owned land for agricultural, fishery or husbandry purposes. • Valid for a maximum of 35 years but extendable for another 25-year period with the possibility for renewal. • Can be held by Indonesian individuals or entities as well as foreign joint-venture companies. • This land right can be mortgaged.
  • There are basically five types of land rights held under There are basically five types of land rights held under the Agrarian Law: the Agrarian Law: Rights to build • Right to develop buildings on land owned by others. • Granted for a maximum initial period of 30 years and extendable for another 20-year period with the possibility for renewal. • Can be held directly by Indonesian entities or foreign joint venture companies. • This land right can be sold, exchanged, transferred, bequeathed or mortgaged.
  • There are basically five types of land rights held under the There are basically five types of land rights held under the Agrarian Law: Agrarian Law: Rights of use • Right to use state-owned land or land owned by others for a specific purpose as agreed by both parties such as for social activities, religious worship, embassies and international organisations. • Right of use granted over state-owned land is valid for a maximum of 25 years but extendable for another period of 20 years / occasionally for an indefinite period as stated in its grant or agreement. • Right of Use granted over an underlying Right of Ownership (Hak Milik)title is valid for a maximum of 25 years but cannot be extended. • Can be held by Indonesian citizens and entities, foreign invested entities, individual foreigners residing in Indonesia, foreign embassies or representative offices of foreign entities. • This land right can be sold, exchanged or transferred subject to approval of the land owner in each case.
  • There are basically five types of land rights held under There are basically five types of land rights held under the Agrarian Law: the Agrarian Law: Rights to operate • Right to operate state-owned land for a specific purpose as approved by the authorities. • Given exclusively to government institutions or state-owned companies for an unspecified period. • Can be transferred to a third party in the form of ‘Hak Guna Bangunan’ or ‘Hak Pakai’.
  • Risk and Return
  • Factors affecting the selling price of a property: 1. Demand : willingness and ability of people to buy or rent a particular property. Three principal sources: • Basic economic: In the real estate market, purchasing power source comes from the work. • The nature of the population: Demographics, Psychographic • Mortgage Financing : Interest rates and mortgage lending Pdf: Bab I Investasi-real-estate
  • Factors affecting the selling price of a property: 2. Offer: Analysis of real estate deals essentially involves competition. Pdf: Bab I Investasi-real-estate
  • Factors affecting the selling price of a property: Example of IMB 3. Property: a) Restrictions on use : property has a social function. There are a lot of restriction. Pdf: Bab I Investasi-real-estate
  • Factors affecting the selling price of a property: Example of -SPPT PBB -STTS PBB
  • Factors affecting the selling price of a property: b) Analysis environment: good location will increase the investment potential of the property. It has little good location 2 dimensions: • Convenience • Environment Pdf: Bab I Investasi-real-estate
  • Factors affecting the selling price of a property: c) Analysis of the field: • The vast size of the property • Quality of Property : ex: drainage to avoid flooding d) Repair : In real estate, repair mean improvement to the property, ex: garage, garden. Pdf: Bab I Investasi-real-estate
  • Factors affecting the selling price of a property: e) Property management aims to oversee a property for the purpose of short-term or long-term property owners, especially in relation to the ownership of the property, ie execute the lease, negotiate rental rates and rental rates reassess, etc.. Pdf: Bab I Investasi-real-estate
  • Risk investing in Real Property in Indonesia 1. The return is not guaranteed by anyone 2. This is a medium/long term investment. It can take considerable amounts of time to achieve a return; think in terms of years, not months. 3. Land is a capital illiquid asset and it is difficult to realize cash from it in a hurry, unlike stocks and shares. 4. Promoting land for future development is often complicated and not cheap.
  • Risk investing in Real Property in Indonesia 5. Money spent on planning promotion is all completely speculative and you can't get it back. 6. Money spent on maintaining the property every year or month. (for house, apartment, etc.) 7. Buy by credit, pay high interest rate News: down payment (down payment / DP) mortgages (mortgages) to 30 percent 8. High interest rate, reduce the interest of the buyer to buy the property
  • Increase of price of building material s
  • Advantages to invest in property 1. Great benefits when selling a property like houses and land 2. Get money continuously when the rental property 3. Return around 2-10% per year 4. Property prices will increase each year
  • Advantages to invest in property 5. Risk relatively low 6. Prospective investor doesn’t need to have much money to purchase the property. 7. Investors do not necessarily have to monitor the price of the property every day or every month
  • Property price • Property prices rose by 2.56% in 2008 • Property prices increased by 2.3% in 2009 • Property prices rose 2.91% in 2010 • Property prices rose by 5.05% in 2011 Source : http://www.globalpropertyguide.com/
  • Price Graph of Property in North Jakarta
  • Asia: Price Changes in 5 Years
  • Risk and Return
  • Future Opportunities
  • FUTURE OPPORTUNITIES The 2007 ASX/Russell Long-Term Investing Report has found shares have outperformed an investment property over the past 10 years. Will property or shares be the best option for future investment? Resident finance Ross Greenwood gives us some hot investment tips and LJ Hooker CEO Warren McCarthy talks about property investing. "Predicting whether to invest in shares or property in the next 10 years is very tricky, because who would have been able to predict Coles Myer would have been a risky investment or Telstra would have gone through such turmoil", says Ross.
  • FUTURE OPPORTUNITIES If investing in shares, select good shares. Diversify when you are selecting your shares so you invest in different businesses, for example a mix of retail, publishing, brewing, says Ross. "Sell your shares if you think they are too high and take opportunities to invest in shares when they are cheap", he says. Ross says that Interest rates will fall over the next two or three years so if you are investing in property it is a smart idea to invest in areas with high population growth such as Queensland and South-East Queensland. Best investments over the 10 years: 1. Listed Property Trusts 2. Australian Shares 3. Residential Property 4. Fixed Interest Investments 5. Cash in bank
  • FUTURE OPPORTUNITIES "The best investments over the past 10 years are listed property trusts - which are basically property trusts listed on the stock market that invest in offices or retail or whatever it might be, Australian shares, and residential properties. Fixed interest investments - are way behind, and cash at bank - just don't do it. The message here is don't leave to much cash in the bank", says Ross. Ross explains that although keeping your cash in the bank might seem like a good idea for the older population - people are living longer these days and you need to invest your money to make money for your future. "The problem is most people get to 60 and just put all their cash in the bank - but your life span might go on until your 90 and that’s the reason why assets need to keep growing", says Ross. Best investment tips for the future: •Diversify your portfolio and invest in a variety of different businesses •Invest in assets that will grow and that have an income (see below: Ross' 'building blocks' for a diverse investment portfolio) •Buy assets that will last - invest in the share market for the long term you will make more money.
  • FUTURE OPPORTUNITIES Warren McCarthy's advice: "People are comfortable dealing with bricks and mortar as there is a culture in Australia about buying your own home", says Warren. Warren says that people feel they have a better knowledge with investing in property than investing in shares and since the value of property doubles every six to seven years - property is a good investment. "Property is going to look fantastic for the next few years and there is two main reasons, one is the fact that rent is soaring at present so from an investment view its good to get in now and take advantage of that rise in rental return. The other is supply - at the moment we are having a drastic lack of supply of property to meet the demand right around the continent", says Warren. Although property prices are increasing, Warren says that the next few years will be a good time to invest in property. "The rental yields are at an all time high, so now is a good time to take advantage of the high rental price," he said.
  • FUTURE OPPORTUNITIES The rationale for investing in land Despite this, there are many sound and rational reasons for considering this as an attractive investment opportunity at the moment. These include the following 13 reasons. Land is a tangible fixed asset. The value of land and property may vary but it rarely reaches zero, so it always has a base value. It is a finite resource. The value of property can be realized. It's value can be enhanced by planning promotion, obtaining consents or acquiring complimentary land interests. House builders will always require land with consent as their primary raw material to continue in business.
  • FUTURE OPPORTUNITIES  The amount of land being promoted within the planning system is reducing as the large house builders cut back on investment in forward land due to losses and the reduction in house building.  There are a limited number of companies actively promoting land for development due to the credit crunch.  There is the possibility of making considerable capital gains.  The disposal of an interest can be timed to react to market conditions and the position in the property cycle.  Base rate is at an all time low so returns from savings are extremely poor.  Inflation is dropping but is still at 3% so real returns are still low and falling. The leading cash ISA is yielding 3.51% at the moment so with inflation at 2% the real return is just 1.5% net!  Cash is king at present. Having lent prodigiously to the sector for many years, the banks are now reluctant to lend further on property. In view of this gap in access to debt, there are some great buying opportunities opening up in the land market.
  • FUTURE OPPORTUNITIES As the property market is in such a poor state, why invest in strategic land now ? now is an excellent time to take the plunge for the following reasons. • • Greenfield land needs to be promoted and allocated for development before it can be granted planning consent. Land allocated for development or with consent is the primary resource for house builders. House builders need large amounts of land for their business every year. The UK's very largest house builders have been building up to 15-16,000 homes per annum and so need to acquire over 15,000 plots of land every year just to stand still! Even now in these days of reduced house building, Persimmon PLC completed 10,202 homes in 2008 and had a land bank of 69,279 plots either owned or under control. However the company has had a very cautious approach on land buying for more than 18 months and expects to reduce its land bank by using land under its control rather than new purchases. This strategy has a finite life as eventually any land bank will become exhausted. So if Persimmon continued to build at the same rate in the future as it did in 2008 it's land reserve would be gone in 6.79 years. If the company increased it's house building rate or any of its consent's lapsed then this duration would be reduced.
  • FUTURE OPPORTUNITIES The major house builders have built up stocks of land which they hold to cushion them against the time it takes to buy land and obtain detailed planning consent. At the moment the major house builders are not buying land and are using up their land banks. The residential land market is affected by the demand from house builders which in turn reacts to the housing market. Whilst there are time lags between the 3 markets, the land market can be extremely sensitive (and volatile) because there are relatively few land interests on the open market at any one time and a single house building company desperate to acquire land in an area at any one time can push the price much higher than normal very quickly. Getting the timing right to maximize value is essential but one needs to have got the groundwork right and have a consent ready. This means starting the process years earlier when the market is low and the best deals can be done, which is the current position. Once land has been allocated for development an owner can decide the timetable for turning this into a consent to favor the position in the property cycle. As it takes time for land to be allocated and consented it seems logical to start this process at, or approaching the bottom of a property cycle