2011 Real Estate Directions

2011 REAL ESTATE DIRECTIONS

                        Don’t look for any surprises or any miracles for Real Estate in 2011:

TROUBLE BREWING:

                        China:  China’s markets are overvalued, and despite all the wishful thinking that prices will increase or at least not decline that is a false hope.  Look for prices in the major markets such as Shanghai and Beijing to drop by as much as 20%.  The supply has not only caught up but is now beginning to significantly exceed demand.

                        Australia:  Australia will also see a 10 to 15% drop (correction) in prices.  Australia has experienced a six year run fueled in part by Asian Buyers.  Asian Buyers will not continue their “unbridled” purchases of Australian Real Estate because the “glamour” will wear off.  Many of the properties that are being purchased are for investment of seasonal use.  These purchases lose their charm after three to five years, and the market will soon be flooded with “For Sale” signs.  The domestic Australian market is not big enough to support the supply of housing and development especially in the upper brackets where a lot of the current success and price appreciation has been.

NO RELIEF IN SITE:

                        America:  There is no relief in sight.  25% of the homes in America with mortgages are “underwater.”  At some point they will be on the market flooding an already flooded market.  In some markets in America the only transactions are foreclosures and “short sales.”  2011 will be another dismal year.  The only good news is that the Housing News is so bad that there is not much “new” housing being brought to market.  There are some “relatively speaking” bright spots such as Texas, but the gloom in Florida, Nevada, and California will persist for years, and that will also affect national prices and national attitudes.  I repeat, “There is no relief in sight for 2011.”  The bottom may come late 2011, but a 2012 bottom is more likely.

BRIGHT SPOTS:

                        There are three Countries that will experience good real estate markets in 2011:  Turkey, Thailand, and Columbia. 

                        Columbia is an interesting story.  The Country is becoming more stable with less “Drug Trafficking and Violence.”  Peace brings stability; Stability brings prosperity.  Columbia is experiencing solid economic growth and a solid real estate market will follow.  There are investment opportunities in Columbia.

                        Thailand has made the News with some Political Violence and Discontent, but by and large, the Country is experiencing an economic boom.  This solid economic boom will translate into solid gains in the Real Estate Sector.

                        Turkey represents the brightest real estate market for 2011.  Here is a country that has no significant natural resources, but continues to amaze with both political and economic stability.  It has a well educated and trained work force, a middle class, a strong banking sector which set the stage for strong gains in Real Estate.  There is also a large influx of foreign buyers along the coastal and resorts areas.  Unlike Australia this market will be sustained by continued strong economic growth in Europe and easy access to Turkey from Europe.  There are both buying and investment opportunities in Turkey.

John Keith, Shanghai, November, 2010