Grand Dreams in Property

The Trend

“Rich Asian individuals are snapping up luxury residential properties and even office towers in the West. But Asia’s biggest investors, including sovereign wealth funds, insurance funds and pension funds, are only just getting into the real estate game.

According to a new report released Wednesday by real estate firm CBRE, Asia’s institutional investors have just 1.7% of their assets in real estate, compared to as much as 8% by similar investors in Europe and North America.”

Tokyo Cheap to Hong Kong Luring Asian Bargain Hunters: Mortgages

“Asian investors like Chang are being lured by returns as
high as 8 percent on rental income and signs the property market
is recovering. The government’s resolve to keep the yen weak has
also made real estate in Japan more affordable compared with
Hong Kong, Singapore and Taiwan, where governments have been struggling to contain surging residential prices.

Home prices in Tokyo are around 120,000 yen to 150,000 yen
per square foot, according to Chicago-based Jones Lang LaSalle.
That compares with about 280,000 yen to 400,000 yen in Hong Kong
and 200,000 yen to 250,000 yen in Singapore, it said.”

Source : Bloomberg

“House prices in London are continuing to outstrip those in other parts of the country, according to the latest Land Registry figures.”

Crying Foul

I was hearing all sorts of claims and gossip on how property owners are buying small stakes into each other’s buildings to boost price levels and secure higher leverages. All hearsay of course.

““Three straight months of national home value appreciation above 10 percent is not normal, not sustainable and, frankly, not very believable.”

“US housing affordability (a topic we first covered a month ago) has collapsed as a result of the monthly payment on the median home sold soaring by nearly 40% from under $800 to just shy of $1100, a level not seen since 2008. Now if only US personal incomes would keep pace …”
“Gorilla Capital seeks out some of the most distressed properties to avoid competition and get the best deals, then sells them 60 to 120 days later after major renovations for an average 13 percent return.”
The End Is Nigh
I have often wondered why the Chinese families buy like half a dozen properties when they only have 1 child to live in all of them ?
The population is not exploding and surely they do not expect foreign demand ? Migration ?
Anyway, this Barry Ritholtz observation is the most astute summary you can get on the current boom.
Houses need people to live in them at some point in time.