I’ve been to
Europe and I’m excited. There’s blood on the street for real estate. I know
it’s far away and many Asian investors are unfamiliar. But it’s not that
difficult. Real estate in most of western Europe is down 50 – 60%. In London,
outside of Zone 1, places like Canary Wharf is still 10 – 30% below 2007’s
peak.
I would say
that in order of upside, I’m the most positive in the following cities /
countries:
1.
US
excluding New York: 50 – 90% in the next three years. Limited financing
available, up to 70% LTV for now. Capital gains tax of around 15% will be a
drag. Watch out for 3 – 5% per year of forex losses though against SGD.
2.
Cities
like Dublin / Madrid: 60 – 100% in next three years. Almost no financing
available now but it may be available in one to two years’ time. Capital gains
tax of up to 30% will be a drag though. Expect 4 – 6% per year of forex losses
per year.
3.
Cities
like London 30 – 50% in the next three years. LTV of 80%. Expect 2 – 4% of
forex losses per year.
4.
Certain
asset classes like Iskandar. Expect 30 – 50% in the next three years. 70 – 85%
financing. Lack of transparency in legal framework.
5.
Singapore.
Expect minus 20% to plus 10% appreciation in the next three years. 50 – 80%
financing.
2013 – 2014
will be exciting because it will be a time to pick up very cheap assets in US
and most of Europe except for London and in Iskandar. For London and Iskandar,
the asset appreciation phase has already started in 2011/12. There is still
upside but it will be less than in the areas mentioned in 1 and 2.
2015 – 2016
will be the asset disposal phase. You have to be very careful, liquidate assets
that are very low in terms of yield spreads. Keep lots of cash to be on
standby. Make sure your rental income covers 125% of the mortgage to have a
buffer in case a crash happens.
Nothing lasts
forever. Neither bad nor good times. Remember that.
