Of Interest

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Monday, January 31, 2011

Marc Faber: I like Asian Real Estate in Developed Asian Countries.

Marc Faber : "Basically I am not very keen to buy emerging economies at the present time and I would rather lighten up positions. As far as the equity allocation between equities, bonds, cash and precious metals, commodities and real estate is concerned, that depends on every individual. It is like if you go to the doctor and you tell him ‘oh, what kind of pills shall I take?’ That depends very much on the individual, on the status of his health, on his ailments and so you cannot generalize."

"But for me, I like Asian real estate in Developed Asian countries.
He says that there are questions marks published about the data from China,Inflation in China is much higher than what the Chinese government is publishing,Real growth inflation adjusted growth is lower than what they publish,Banks lending rates and the deposit rates we have a very negative real interest rate that is interest rates adjusted for inflation.
That will lead inevitably to some kind of a Bubble and every bubble bursts, I would be very careful about any further commitments to China."

"The correction in asset markets has begun and at 20% correction from the peak I would buy Real Estate that have strong yields and I would buy some precious metals."


Let me point out and refer to one of my previous posts in January 2011, Japan core Tokyo commercial real estate is now at 20% correction form its peak of 2007.

Anyone in the Real estate business can tell you that yields for Japanese Commercial real estate have risen significantly in the past two and a half years. You used to be able to buy a prime office building in Tokyo with a 3.5% cap rate 2 and a half years ago. REITs now purchase at around 7%, and some recent transactions have even gone above 8%. As I’ve covered previously in various posts, the big investors have become very conservative with their strategies - buying up core Tokyo inner 5 wards properties overlooking most assets out side of the 23 wards. Some of the capital flowing back into Tokyo is from international investors – from all the world’s richer countries, including the US, Australia, Germany, the Middle East, and Singapore.

A glut of capital is now accumulating here in Tokyo looking for investments, chasing not just Tokyo office buildings, but anything with a solid return Core Tokyo. The world’s pension funds, insurance companies and mutual funds are gearing up again. This capital, when compounded through leverage, pushes up the price in investment markets, in turn reducing overall return as we move into another property cycle here in Tokyo Japan 2011.

China's Housing Market Nears U.S., Japan Bubble Levels: Chart of the Day 31-jan-2011

http://www.bloomberg.com/news/2011-01-31/china-s-housing-market-nears-u-s-japan-bubble-levels-chart-of-the-day.html

http://www.bloomberg.com/video/66251718/

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