China Real Estate: between 100m and 200m in a 400m Dash
Real Estate Analysis Limited
humble author recently read an article in the newspaper saying that
investors in China real estate have a hard time picking markets because
there are some 656 cities and towns from which to choose in China.
Do you think foreign investors going into the USA markets will investigate
and analyze ALL metros and cities in the USA prior to making an investment
decision? Not even the American investors would do that let alone overseas
ones. Likewise, the hefty fees and immense time required to do that aside,
not to mention the lack of usable data in some (smaller) China markets,
investors who do look at all available markets in China prior to investing
are either nuts or have no common sense.
Nonetheless, while hundreds of markets are somewhat a myth, dozens of real
estate markets in China do exist,
comprising the top tier, 2nd tier, and 3 tier cities. Indeed,
many real estate investment groups have recently branched into the 2nd
and 3rd tier cities citing expensive land in the top tier and
booming emergence in the 2nd and 3rd tiers. However,
your humble author thinks the longer trend and smarter strategy is to
involve fewer, not more, cities. Here¡¦s why using the 400M dash as an
= China has already opened up its economy for close to 30 years and its real
estate market as a whole, despite ups and downs and the vastly regional
differences, is hardly at the start point.
= assume one takes a fast-click camera to record the status of the runners
as they go past the 100m line, most, if not all, of the runners would (seem
to) be crossing this point at roughly the same instance. The distances
between them are minute to the point that the differences may not be easily
recognized or observed.
= a photo shot at this point would likely indicate a tight race still yet
some runners are obviously starting to drop behind while the rest race
ahead. The distances between the runners are recognizable.
= a few
of the runners would usually be in the lead while the rest fall further
behind, dashing any hope of a win. Of those in the lead, probably it is
still too early to tell who would be the winner.
400-meter finish line
= usually the race for the top winning title would involve no more than say
3 runners with the rest following in the back. One of these 3 would pick up
the winner title.
Correlating the above to picking real estate markets in China, your humble
author thinks overall the China real estate market is somewhere between the
100m and 200m points.
While an investor may recognize the significance of one or more of the top
tier cities such as Shanghai, he or she also finds many of the 2nd
and 3rd tier cities looking good with emerging populations and
demographics and offering similar if not better returns. Every such city
appears to have its own reasons to succeed, and while an investor may harbor
a bias for city Y, he or she dares not leave city Z alone and unattended
(and will likely invest a bit of money in city Z too just in case city Z
probably explains some of the (spread out) investment activities made by
Nonetheless, as the overall market matures and edges toward the finish line,
which may be quite a while away still, there will be a few relative winners
and many relative laggards.
unless one is talking about a minimum total investment value of say
US$10,000,000,000, pick no more than 10 cities at first and reduce these to
5 if you can. Less is more.
The article and/or content contained herein are for general reference only
and are not meant to substitute for proper professional advice and/or due
diligence. The author(s) and Zeppelin, including its staff, associates,
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