Where Is The Smart Money Going Now?
“Investors worldwide are feeling battered and bruised,” writes Philippines Correspondent Jeff Finney, “but they still need someplace to put their money. Where is the smart money going now?
“Fixed-income property paying out at least 5% per annum over three to five years. The 8% promises made by some developers are, in my opinion, risky and unachievable in most cases in the current climate. I wouldn’t buy into this level of promise, especially in Thailand, where it isn’t uncommon to exaggerate to get buyers in the door.
“Best buys in Asia remain the tourist-based condominium markets, which will show slower but steady gains in the next three years. In fact, I expect some real accelerated growth in some areas of the tourist property sector by the end of 2009.
“I do not think you will see strong capital growth in established markets like Bali and Phuket, but they will remain stable. Most buyers in these markets got in with cash, so the debt stress is minimal.
“Singapore is shot, and Hong Kong is soft.
“Look for expanding and medium-size markets. These include Boracay in the Philippines, Hua Hin or Pattaya in Thailand (not Samui), and possibly Penang in Malaysia (though this last is a small market island not likely to attract strong cash investment from foreign buyers).
“Look for international hotels moving into a new tourist market; that is your signal to buy. They bring in guests, who, as in Phuket, like what they see and come back to buy a place in the sun for themselves.
“Watch Boracay. ShangriLa has just completed a US$1,000-a-night 200-room hotel here, and a number of major international 5-star hotel chains are looking to do the same. The domestic airport is to be upgraded. In three years, you won’t recognize the place.
“Look to place yourself in established markets on this side of the world. Australia is a first choice. It has seen its dollar collapse against the U.S. dollar (down nearly 40%) but still has a stable property future. Sydney is best. Stay out of the central city area and try to get a water view. Look specifically to Alexandria, Bondi, and the North Shore.
“Now is not the time for China or Macau. Look instead to the Philippines, specifically to the condotels, which have maintained strong income flows. No other Asian country has developed the condotel idea as successfully.
“The Philippine peso has dropped back from 42 to US$1 to 50 to US$1. A very attractive discount on the currency. In addition, the overall health of the economy, compared with almost all other countries in the region, is bloody good.
“The management of the property is the single most important factor you need to look at when buying into one of these condotels. The developer is important, too, of course. Don’t be fooled into buying from a sexy and expensive brochure. Speak with the developer, not only the sales agent. Most important, find out who is managing the project and what they have done elsewhere. Do they understand the condotel sector? On what do they base their guaranteed income figures?”