Q & A on China Real Estate
Real Estate Analysis Limited
humble author has been asked quite regularly of the following questions in
recent times and for the convenience of all, their simple answers are listed
real estate a good buy now? = Yes IF you have a
sufficiently long investment timeframe and no IF you do not.
What is long? 6 years or more is long. What is short? 3 years or less is
short. Anything in between are 50/50. Do NOTE the different markets (cities)
in China could behave differently from one another and thus this highly
generalized question means the answer here is also a highly generalized one.
AND all generalizations are false, including this one. Read this past
article = Not a Good Time to Speculate in China Real Estate =
market (city) is better or best? = IF only one can
be mentioned, then it would be
Yes, its real estate is already pricey, its land costs are high, and real
estate developers are leaving for the presumably greener fields in the 2nd
and 3td tier markets. BUT think about this = unless you are also a real
estate developer, what has their leaving town got to do with you as an
investor of (mostly) existing properties? Developers can still make a buck
even if real estate prices do not go up assuming they get their calculations
right because they have an element which you do not have, which is value
creation via (re)development. But investors of existing properties need
asset price appreciation. Think also this = fewer developers may mean fewer
projects which in turn may mean better bargaining power for existing
property owners assuming all else being equal. Read this past article =
Shanghai is still a Real Estate Investment Favorite =
sector (residential, office etc) is best? = NO
definitive answer here.
Rule of thumb in terms of ascending sector complexity (i.e. to get a grip
of) is Residential < Office < Retail < Hotel < Industrial. Residential and
the Office sectors are usually the relatively easier ones to understand and
participate while Retail, Hotel, and Industrial (including warehouse,
logistics center, factory etc) are harder to fathom. Unless you are in the
business of the latter, better stick to residential and / or office.
Yuan appreciation? = A Billion Euro question
(don¡¦t want the greenback that much anymore, you know)! Your humble author
does not recommend acquiring China real estate simply because one expects
the Yuan to appreciate. One needs to ascertain China real estate on its own
merits. IF one thinks fondly of the Yuan, just buy some. Read this past
article = Reasons Not to include Currency Appreciation in Financial Analysis
http://www.real-estate-tech.com/articles/ret2Q08.pdf [3rd article in the
economy decoupled from the USA / Western economies?
= this Decoupling theory sounds more like a
marketing tune. Read this past article = Decoupling? What
of the austerity measures?
= Don¡¦t feel like these are meant to make asset
prices drop but just to slow them down, real estate included.
Unintentionally pricking the bubbles, assuming they exist? Probable. Watch
for opportunities in some of the luxury residential sectors.
= what about it? Not unattractive
but also not quite as attractive as before. Also, from a Euro standpoint,
little profit is made despite real estate price gains in HK$ terms. Also a
typical Hong Kong home has lost around 75% of its bartering power since
1997. Read this past article = Euro-Adjusted Indexes Indicate No Price Rise
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