Beijing real estate offers limited opportunities

A realty agent introduces a property project to potential homebuyers at a real estate fair in Beijing, September 19, 2015. [Photo / VCG]

Back in 2007, when the world's financial markets were roiled with intense spasms of fear about a new Great Depression, I threw caution to the winds, and bought property. I considered Hong Kong, where I had lived, eyeing the fishing island of Cheung Chau.

Instead, stepping straight into the maelstrom, I bought in Michigan, USA. Sleepless nights followed, but the portfolio's done okay and I can relax a little.

Fast forward, and when I came to China, I hoped to eventually buy here.

But my timing's off. Colleagues have bought well, but some years ago. One has seen her apartment's value grow ten-fold. A similar story from an expat here for over a decade.

The advice I get is Beijing's market is white hot and the affordability ratio of earnings to prices is against the modest buyer. Better to consider tier three, four and five cities. According to new estimates by China International Capital Corp, new mainland home prices will nearly quintuple in three decades.

As I understand it, while the US and other markets were rebounding, so was China's－massively. According to a recent report, China's major cities saw prices grow for the 15th month in a row in July, with the growth rate continuing to accelerate.

Some of these vast profits have been diversified globally and in that sense China's property market is now hardwired to the world's.

The problem for some outside China is they must now reconcile themselves to new dynamics, to a new "big hitter" helping to reshape market forces in their backyards.

UK television programs I watch report huge amounts of foreign capital streaming into London, buying units off-plan and pricing out locals, forcing them to areas whose prices are also escalating. There is some panic about "missing the boat" for those not on the property ladder.

Investors are from everywhere, but billionaire Russians stand out alongside discrete wealthy Chinese. Of course, successive waves of new money driving up prices is nothing new. And they are not the only factor. Cheap money funded by historically low interest rates caused by quantitative easing, sloshing around globally and seeking to find a home, is a huge driver.

But, as housing prices relentlessly spiral upwards internationally, the quest for the poorer to buy－as well as investors to find bargains－becomes more problematic. Smart Chinese, and other money, is on the eternal hunt globally.

I have a plot in the Bahamas. A multi-billion dollar Chinese-funded resort has been built on a neighboring island, although it is experiencing financial difficulties opening.

In Michigan, Chinese have bought Detroit skyscrapers and tens of thousands of homes in the recovering city.

I also have an apartment in Cyprus and there, too, I read about an influx of Chinese buyers.

Lately, I have seen many reports warning about looming housing crises and bubbles in the UK, Canada, Australia and New Zealand－and calls in NZ to ban foreign buyers. A protectionist pattern may be forming. In Greater Vancouver, Canada, a new tax on foreign buyers has been introduced.

I guess China's evolving influence on global residential property has escalated exponentially and will continue to do so.

But I won't buy in Bejing or recommend it to friends and here's why: a kind Chinese colleague sent me a link on mortgages, and the bureaucracy's a killer.

According to property data base numbeo.com, Beijing rates as one of the most unaffordable cities to buy in the world with a price to rent ratio of 39.88, on par with white-hot London.

It can keep going up, of course, but the room for future major increases seems more limited, and corrections possible. By comparison, and just one of many alternatives, I spotted a chic studio luxury apartment in Provence, France, advertised for $58,000.

In an established up-market resort (rated highly by reviews), it offers gross rental yields of 11-14%. Numbeo, the world's top provider of current and timely information on world living conditions, has inner city Beijing apartments yielding 2.5% gross. The Provence rentals are managed by the resort operating company－and I can stay whenever I want. Plus there are speculative markets like Cuba, where US buyers can't buy at all and where other foreigners can only currently buy from restricted stock, but which promises a huge bonanza if it is ever fully opened up, as appears possible. So.... sorry Beijing!