While China may not have beaten the United States during the Olympic Games, it is soundly trouncing our nation in the real estate investment department.
Business Week says that real estate investment in China was up to $156 billion last year, double the total of the 2008. With China’s economy expanding at a 10.7% rate on an annualized basis, based on 4th quarter results, it is not surprising to see large pools of capital launch themselves into the China market, Of course, the $586 billion stimulus package that was set in motion by Premier Web Jiabao certainly did not hurt the perception of China as a veritable blast furnace of growth.
However, this rapid rate of economic expansion has caused China to take a hard look at the acceleration in real estate prices. In January, the government put back in place a sales tax on homes that are sold within the first five years of ownership. This government imposed braking system appears necessary to curb what looks like a new real estate bubble, as estate prices in December showed their highest rise in the last 18 months.
As China reveled in real estate triumph, the United States simply slumped by 64% to a not so grand total of $38,000,000 in investment sales. However, the Wall Street Journal suggests that as the U.S. lumbers its way out of recession in 2010, property investment will increase by at least 50% to $64 billion. This is likely to occur because of the sheer volume of distress sales and continually falling prices due to the glut of available investment property. There are large number of investors sitting on piles of cash, waiting to pounce on the perceived bottom of the market when it finally arrives.
Meanwhile, in Japan, where investment fell by 45% last year to $19, billion, the investment climate is poised for revival. That nation is watching distressed rental properties selling at prices lower than their original construction costs. The resulting cash flow more than covers finance costs and allows owners a tidy profit on their investments. The result, of course, is a run-up in property values as investors rush in to catch these multi-family bargains before they disappear in an onslaught of cash.
The combined sales growth in China and Japan, along with other nations in the Asia-Pacific rim, is expected to top $258 billion this year. This is an increase of 20% over 2009’s sales of investment property in the regiona.
In Europe, with England, France, and Germany in the lead, a strong rise in real investment sales is predicted by the New York Times, which says that volume of investment property should rise by at least 43% to $151 million. This stimulus is likely to be lead by Great Britain, whose prices fell by 44% and bottomed before those of most other nations. It was this price drop, along with a falling pound, that gave the initial impetus to investment and helped to increase property prices in that nation.
Written by Marc Jablon, from the Realty Associates
marcjablon@yahoo.com
561-213-6139
www.MarcJablonHomes.com
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