Originally Published by REmatrix.com in June 5, 2007
– Toronto, Canada
Topic:
Globalization – An Overview of International Real Estate
Markets
REmatrix.com
www.rematrix.com
Would you comment on some of the trends or underlying dynamics of the countries with which you’re familiar?
Would you comment on some of the trends or underlying dynamics of the countries with which you’re familiar?
Forbes
Rutherford
Let’s refer to some of the countries, whose expatriates’ make up part of the Diaspora of North American’s citizenry and could easily be aggregated into private equity pools aimed at investing in their native land assuming of course that the risk is manageable.
Let’s refer to some of the countries, whose expatriates’ make up part of the Diaspora of North American’s citizenry and could easily be aggregated into private equity pools aimed at investing in their native land assuming of course that the risk is manageable.
Consider:
India
–
Prior to 2005 banks and pension fund ownership rights were severely limited, acquisitions were completed as “all cash deals” and primarily by the “end user.”
Prior to 2005 banks and pension fund ownership rights were severely limited, acquisitions were completed as “all cash deals” and primarily by the “end user.”
Post 2005,
with changes in government policy on credit
and expatriate investment, a highly educated
population with a relatively stable
democracy has shaken lose its artificial
constraints and become a global powerhouse.
Major financial players have set up in
India, the mortgage market is expanding, and
the Middle Class is growing. This has had a
direct effect on retail development. Over
300 malls will have been built by 2008.
Retail expansion and housing starts is not
the underpinning of a healthy economy but
rather its measure. India has poured money
into energy production and distribution
infrastructure to support its growing
manufacturing and knowledge based
industries. It’s a frenetic market that
adheres to business rules that are familiar
to North Americans.
China
–
A politburo with unfettered mercantile tendencies that has little regard for collective safety let alone individual rights to life, liberty and property (real or intellectual.) The political elite are trying to reconcile the consumerist demands of an austere and rapidly growing middle class within the confines of a giant agrarian serfdom that has only begun to rebel against government sanctioned Dickensian themed workhouses.
A politburo with unfettered mercantile tendencies that has little regard for collective safety let alone individual rights to life, liberty and property (real or intellectual.) The political elite are trying to reconcile the consumerist demands of an austere and rapidly growing middle class within the confines of a giant agrarian serfdom that has only begun to rebel against government sanctioned Dickensian themed workhouses.
China sells
products and makes strategic off-shore
investments in raw commodities with client
companies. Its trade imbalance and
associated risk with these client countries
is akin to “Godzilla” walking a tightrope.
It excavates client country’s mineral and
energy wealth through ersatz corporations
and stamps its political feet if it doesn’t
get its way. Free markets and mercantilism
can not co-exist and in time will rupture;
in the meantime however Western societies
will hold their collective noses
because…”well Jiminy Cricket, you can’t beat
the price!” Wal-Mart will be building 400
stores over 10 years. Commercial and retail
structures are built on top of land leased
by the government for seventy years. There
is nothing “free” about trade activity with
China; Western consumers have traded their
country’s manufacturing sovereignty by
supporting predation.
With seventy
year land leases, there are at least three
generations of real estate careers, which
will provide all manner of real estate and
construction services to the Chinese
economy. However I can’t help but remember
the recent and very public trashing of
corporate offices by miner families when
they learned about the unnecessary death of
over a hundred miners and fathers. No pun
intended, but I believe the anger and
anguish by these families is simply the
Canary in the shaft as it foretells a
growing anger within the economically
disenfranchised Chinese masses.
As Japan and
Saudi Arabia have done and continue to do,
China needs to ship money out of the country
to offset trade imbalances. Real estate is a
convenient place to park capital offshore,
but I wouldn’t bet the farm on China’s
ability to sustain its growth without
serious social and economic upheaval. You
can tell I’m not a big fan of communist
tainted mercantilism masquerading as a free
market capitalist society.
Russia
–
The concept of “capital preservation” takes on a whole new meaning when hiring a body guard is part of your business expense while traveling there. Doing business requires sophisticated and connected associates that can guide you through the three separate and not necessarily equal economies in Russia. The first two are hidden and weld great influence – the Kremlin and the Military. The third is the Public economy and is what we read about in the daily press. Within this framework, the country is undergoing a clash of competing ideologies - reform versus reactionary; and the people that are outside the hidden economies vacillate between embracing the vagaries of reform and returning to a time of collectivist entitlements.
The concept of “capital preservation” takes on a whole new meaning when hiring a body guard is part of your business expense while traveling there. Doing business requires sophisticated and connected associates that can guide you through the three separate and not necessarily equal economies in Russia. The first two are hidden and weld great influence – the Kremlin and the Military. The third is the Public economy and is what we read about in the daily press. Within this framework, the country is undergoing a clash of competing ideologies - reform versus reactionary; and the people that are outside the hidden economies vacillate between embracing the vagaries of reform and returning to a time of collectivist entitlements.
Czech
Republic
–
The Czech Republic is an interesting contrast to the Russian Republic. They’re introducing the right mechanisms for practicing real estate. They’ve amended corporate structures to include limited liability and joint stock companies. They’ve introduced a variety of debt instruments; and most importantly for landlord security – lease provisions that are enforceable.
The Czech Republic is an interesting contrast to the Russian Republic. They’re introducing the right mechanisms for practicing real estate. They’ve amended corporate structures to include limited liability and joint stock companies. They’ve introduced a variety of debt instruments; and most importantly for landlord security – lease provisions that are enforceable.
Spain
–
The Spanish worker is one of Europe’s most productive; interest rates are low and the country has become an attractive place to do business. These factors may undergo some friction if the Euro-Government enforces Pan-European rules as a means of protecting old Europe at the expense of new Union members that are rapidly growing within the Euro trading block.
The Spanish worker is one of Europe’s most productive; interest rates are low and the country has become an attractive place to do business. These factors may undergo some friction if the Euro-Government enforces Pan-European rules as a means of protecting old Europe at the expense of new Union members that are rapidly growing within the Euro trading block.
Turkey
–
It sits on the margins of the European Union looking in wanting to be embraced like a jilted lover. Much like the Czech Republic, it’s introduced westernized debt and mortgage instruments; and provides for limited liability and joint stock companies. There are opportunities to be had in Turkey, for instance – not one enclosed mall exists in Turkey.
It sits on the margins of the European Union looking in wanting to be embraced like a jilted lover. Much like the Czech Republic, it’s introduced westernized debt and mortgage instruments; and provides for limited liability and joint stock companies. There are opportunities to be had in Turkey, for instance – not one enclosed mall exists in Turkey.
Mexico
–
With sixty percent of its population under the age of thirty, Mexico will not be slipping into zero population growth anytime soon; unlike Europe, Japan or Canada, which are already there. It has a growing middle class; and is currently suffering a five million unit housing shortage. It’s the third member of NAFTA, one of the world’s largest trading blocks – need I say more about its potential.
With sixty percent of its population under the age of thirty, Mexico will not be slipping into zero population growth anytime soon; unlike Europe, Japan or Canada, which are already there. It has a growing middle class; and is currently suffering a five million unit housing shortage. It’s the third member of NAFTA, one of the world’s largest trading blocks – need I say more about its potential.
Japan
–
Japan’s international forays into real estate and real estate debt were not kind to it, however it’s working its way through and appears to be moving forward. Its population is aging rapidly and has entered the red zone of zero population growth. This might explain why Japanese REIT capitalization is expected to treble over the near to medium term as investment yield becomes critical to the aging unit holder.
Japan’s international forays into real estate and real estate debt were not kind to it, however it’s working its way through and appears to be moving forward. Its population is aging rapidly and has entered the red zone of zero population growth. This might explain why Japanese REIT capitalization is expected to treble over the near to medium term as investment yield becomes critical to the aging unit holder.
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