Archive for September, 2007

Real estate investment as retirement fund


A real estate project near the ChaoYang district Beijing

Every time I move into a new city and stay for more than one year, I will study the local real estate market. If I find some good deals, I would purchase it immediately. If I leave the city, I’d put it for rent. I have invested in real estate in the United States and China. I have seen some good returns on these investment.

I was having my dinner today and glanced through a real estate article in a magazine. The article advocates the real estate investment as a retirement fund. It said that in the future, the riches in China are not the internet darlings or technology elite, but 45-60 elders. Because they buy real estate investments when they are young. The appreciation of real estate bring them wealth. I very much support this view. My experiences of real estate investment in the United States and China prove this view is correct. In the United States, I saw many rich people doing business and invest in real estate. In China, those who own real estate as investment have become very wealthy for the past few years. For the next 20 years, those who own many real estate investments particularly in big cities such as Beijing, Shanghai or ShenZhen will become truly rich.

Not long ago, I gave a presentation to our university first year graduate students. The intention is to introduce the research concept to them and prepare them for the graduate studies. I prepared two PPT documents, one for my research, and the other one for the cash slow analysis in the real estate investment and some case studies from my own experience. I asked the students which topic they would want to hear. Almost all the students said that they would want to listen to real estate investment. With the real estate price skyrocketing in major cities, no wonder students see it as a quick way to gain wealth.

I have no doubt that China’s large cities, such as: Guangzhou, Shenzhen, Beijing, Shanghai will see a very long-term appreciation in real estate. A long-term bull market for real estate had begun. 5 years ago, many of the people felt that 5000 Yuan / square meter in expensive for Beijing. 2 years ago, 8,000 Yuan / square meters was high. This year the average price for Beijing apartment is over 12,000 / square meters.

In the macro Chinese economical environment, there is excessive liquidity which resulted in some bubble in both real estate and the stock market. There might be some corrections in real estate price such as those corrections we saw in 2003 and 2004. However, over the long term (10 years), Beijing’s housing prices will continue to rise. In the near future, the average prices of over 30,000RMB / square meters is not an imagination.

In the Chinese media, there is a newly invented word called the

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