从投资回报和风险角度看现时投资中国房市 By miat42

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We all know that prices in Chinese urban regions have risen nearly 10 folds in last 10 years. Many people love to debate if the price will rise higher or finding a turning point to trend down. I don't believe this is the right way to look at this problem. The right way to look at this problem is from investment return point of view.

Return potential:

With 10 fold price rise already in rear view mirror, how much future return will it bring us? Probably not a lot based on the amount of money needed to be spent as a base. A doubling of your money from today's level would mean that the total appreciation would become 20 folds altogether, a truly astronomical number for a moderate 10-15 year period. But as far as your investment return if you deploy your money today, it would only mean a doubling return, not bad, but it's so easy to find alternative to make similar or even greater returns with that same money in other places.

Risk:

The key for investment is to seek a high return and low risk setup. However, today's level in China is definitely not low risk. If the current cycle is not near the end, it's most probably in the latter phase of the entire cycle. Thus the risk is very high at this stage. I admit that the Chinese price may not drop immediately, it may continue to rise slowly for a while with an ever rising risk level...

Income:

We all know that rental income is very low compared to prices. No need to elaborate further here.

The right investment in the world is always:
1) Low risk
2) High return
3) Great cash income to offset carrying cost.

Today's Chinese real estate market does not qualify any of these three criteria.

Alternative investment: US REO market, auction or short sale market where you can trully find high return and low risk environments as long as you have the patience for a while. If I have 2 Million RMB worth of money. I would buy 2 or 3 Northern Virginia REO properties that their prices have discounted nearly 60-70% from the peak. These properties have bottomed out in pricing, and selling like hot cakes with more than 10% capital return ratio. Therefore, the investment environment on this side of the world is heaven and earth compared to the other side of world.

I am a cool blooded investor with NO emotion attached. I recently sold my China properties and loaded up REO properties in the USA.

I have no doubt for the accuracy of my decision. Thus share with you all.