HOT REAL ESTATE MARKETS

The 10 real estate markets wealthy investors are going gaga for

Gus Lubin, Business Insider
Apr. 7, 2011

The most favored investment type of rich people around the world is property, according to the Citi Private Bank and Knight Frank Wealth Report.

True high rollers consider real estate of all kinds in all countries. Like distribution and industrials in the UAE. Or development land in Zambia.

The Wealth Report picked out 10 great international real estate investments.
1 means low risk, poor yield, low potential; 10 means high risk, high yield, high potential.

#1 Commercial real estate in emerging Asia
Risk Factor: 8
Yield Factor: 8
Capital Appreciation: 8

"We like emerging Asia for one simple reason – real-estate returns are driven by economic growth and very favourable demographics, rather than leverage and yield compression. Greater trade and industrialisation drives demand for logistics facilities; growing incomes swell the middle class, which creates opportunities in retail and leisure; an expanding services sector opens up opportunities for offices; while a young, growing population needs modern residential accommodation."

#2 Development land around Lusaka, Zambia
Risk Factor: 7
Yield Factor: 8
Capital Appreciation: 7

"Zambia has a serious housing shortage – it needs to build at least 150,000 housing units a year. Construction is a major contributor to the country’s economic expansion. Growth in the sector is expected to have reached 10% in 2010, driven by strong demand for residential and commercial developments, energy, mining and transport infrastructure."

#3 Secondary UK residential investments
Risk Factor: 5
Yield Factor: 7
Capital Appreciation: 7

"First, go for secondary stock in good locations in central London. Headline figures demonstrate the strength of the recovery in the London market, but they also mask that secondary properties, even in good residential areas, are trading at a deep discount to the best stock. They offer some of the best rental returns and improvement can often add value. Second is development stock in good regional cities, such as Manchester, Birmingham and Bristol..."

#4 Commercial property in Poland
Risk Factor: 5
Yield Factor: 7
Capital Appreciation: 6

"The Warsaw office market has avoided the overdevelopment that it experienced during previous market cycles, keeping the vacancy rate well below those of other CEE capitals, at 9% at the end of 2010. Warsaw’s rental growth prospects are among the best in Europe – forecasts say that prime office rents will increase by 3.2% in 2011 and 4.7% in 2012."

#5 Distribution and industrials in the UAE
Risk Factor: 6
Yield Factor: 8
Capital Appreciation: 5

"In some sectors values have fallen by as much as 60%, but away from high-profile offices, glittering shopping malls and alluring waterside residential schemes, the understated “shed” sector can provide robust income returns. Values have fallen along with other property assets, meaning that now could be the time to take advantage of a sector that looks undervalued, yet is supported by strong market fundamentals."

#6 Luxury new homes in prime European cities
Risk Factor: 1
Yield Factor: 2
Capital Appreciation: 5

"The smart money going into the European residential market is likely to keep a clear focus on property that offers both the very best quality, and for which there is a marked scarcity. A beautiful private home in a sought-after location will always attract interest. The appeal is to owner-occupiers and the commitment is long term. The enjoyment of ownership is equal to the performance of the investment."

#7 Education real estate in Asia
Risk Factor: 5
Yield Factor: 0
Capital Appreciation: 8

"Investments in education real estate demand the same selection discipline and risk appetite by investors as with any other residential real-estate investments in developing countries. For longterm visions of such projects, investors should choose to work with developers who are not only locally rooted, but also understand the education needs of the community."

#8 Residential development in eastern Mumbai
Risk Factor: 6
Yield Factor: 4
Capital Appreciation: 8

"The coming decade will see most infrastructure spend and development in Mumbai to the east of the city and on enhancing connectivity with the west. Infrastructure projects, such as enhancements to the Eastern Express highway, the Versova-Andheri- Ghatkopar Metro rail project and the proposed new airport at Panvel are expected to benefit the eastern corridor more than the west. This is likely to accelerate change in residential and commercial markets in eastern Mumbai."

#9 Distressed US real estate and property debt
Risk Factor: variable
Yield Factor: NA
Capital Appreciation: NA

"The next two years could provide opportunities for investors seeking to exploit the challenges many financial institutions face. These asset dispositions should create attractive investment opportunities in underperforming and nonperforming loans. Non-performing loans can often be purchased at an attractive discount to par value."

#10 Commercial property in Sao Paulo, Brazil
Risk Factor: 6
Yield Factor: 8
Capital Appreciation: 5

"The demand for A+ and A-grade office space has been exceeding supply as newcomers are establishing activity in the country or expanding their operations. Sao Paulo is experiencing a vacancy rate of 2.8% and as of October 2010, about 105,000 sq m have been absorbed in the A+ and A-grade office market. Private equity and real estate funds have been very active, as they expect further increases in lease rates and price per sq m. Cap rates of about 11% have proved attractive to foreigners."

Photo By: PnP