In Shift, Chinese Move More Money Overseas......

This is article from New York Times, dated Feb 2nd 2008.

http://www.nytimes.com/2009/02/03/business/worldbusiness/03yuan.html?_r=1&scp=4&sq=china%20real%20estate&st=cse

Because of massive economic growth, China was known for magnet of overseas investment. However, due to slow down and economy growth and unclear future, Chinese are moving more money overseas.

- Statistically, inflow of investment is declining while outflow is increasing --- making Q4 2008 total outflow to $240 billion.

- Chinese government's committed effort to maintain Yuan's value (against US dollar) is also accelerating outflow of Chinese money to overseas.

- Since import decline is larger than export, China's trade surplus is increasing. But it is offset by outflow of private capital to overseas. In fact, China's quarterly currency reserve in Q4 2008 has declined by 74% to $45 billion, equivalent of spring 2004.

- It appears that wealthy Chinese investors are overseas investment are "safer" than one in China, driven by declining stock/property value, unemployed migrant farmers (20 million), slowing export and economy.

- Online real estate brokerage firm announced foreclosure property tour in US markets. It is filled up quickly and 400 investors are on wait-list. As Chinese investor think that China property has not hit the bottom, US properties seems like bargain and stable.

- Other notable trend is; high-yield bond from US corporation; managing export receivable in overseas bank account; purchasing diamond and gold in Hong Kong.

- This trend of declining receivable of foreign currency "could" cause Chinese government's purchasing ability of US treasury (then who pays for Obana's stimulus plan?).

While Chinese government does not publicly admit, wealthy Chinese investors feel uncertain about China's future as export driven model is clearly not working as it used to. It is very important to observe how Chinese government domestic consumption/investment stimulus plan revive the Chinese economy. I personally think that there are more than 50% chance that China goes into recession (or less than 5% GDP growth).

Lastly, US real estate is clearly seen as "safe heaven" among overseas investors now (see below link). Inflow of overseas capital will certainly help US property market to hit the bottom sooner......

Foreign Investors love US Commercial Properties.
http://alteredstatesofrealty.blogspot.com/2009/02/foreign-investors-love-us-commercial.html

Happy Investing!!!!!

Foreign Investors love US Commercial Properties.

AFIRE (Association of Foreign Investors in Real Estate) is association of global investors
with a common interest in preserving and promoting investment in cross-border real estate.

This posting introduces AFIRE's annual survey regarding its member's attitude on commercial real estate investments in 2009.

http://www.afire.org/foreign_data/2008/PR.pdf

Here is summary of the survey:

- AFIRE members collectively owns $1 trillion of real estate asset globally and $371 billion in USA.

- Because of commercial real estate bubble bubble burst, the members willingness for investment is very high.

- Foreign real estate lenders say they plan to increase lending by 54% globally and
by 58% in the U.S.

- Equity investors plan to increase investment activity by 40% globally and by 73% in the U.S.

The Top Global City for Foreign Investors’ Real estate Dollars
1. Washington, D.C
2. London
3. New York City
4. Tokyo
5. Shanghai
6. San Francisco
7. Los Angeles
8. Paris
9. Houston
10. Singapore

The Country with The Best Opportunity for Capital Appreciation
1. USA (37%)
2. Brazil (16%)
3. China
4. UK
5. India

The Country with the Most Stable and Secure Real Estate Investments
1. US (53%)
2. Germany (11.3%)
2. Switzerland (11.3%)
4. Australia (4.8%)
5. Canada (4.8%)
6. UK

US REAL ESTATE TREND

- In terms of both stability and appreciation potential, the expectation for US commercial real estate is very high.

- Among members, they already invested 45% their portfolio in US properties.

- Regarding type of commercial property, preference is in the order of office, apartment, industory, retail and hotels.

- Survey respondents also indicated that finding attractive U.S. investment properties is becoming less difficult. Fewer than 20 percent of respondents said it was “very difficult” to find attractive U.S. investment opportunities. This is the lowest percentage holding this opinion in the last five years. As a comparison, in 2004, 59.4 percent of respondents said opportunities were “very difficult” to find.

- When asked to what extent a building’s “green” attributes influenced their decision to purchase a property, 11 percent said “significantly so,” and 60 percent said “somewhat so.”

Generally speaking, commercial real estate value should be determined by the Net Income or Cap Rate. However, over last few years, due to speculation and loose lending standard, investors paid premium on commercial properties, often paying "rehabbed" proforma based price. However, as lending guideline has tightened, determination of commercial real estate value are going back to Net Income approach. Therefore, for those investors who have cash and credit, I agree that year 2009 offers great opportunity for long-term cash flow based holdings. As commercial real estate rent and occupancy are declining rapidly, I think it is important to purchase assuming worsened rent and occupancy.

On the last note, Austin Tx, my key investment location, was ranked No. 11th in US city,

Report: Austin continues to be attractive to foreign real estate investors
http://www.bizjournals.com/austin/stories/2009/01/26/daily16.html

Happy Investing!!!!!