The Cyprus real estate market represents quite outstanding potential for foreign purchasers; these purchasers may wish to invest their money and time in an apartment, villa or other real estate in Cyprus after seeing a wide range of real estate possibilities. The real estate market of this country is particularly strong and Cyprus is a desirable investment location for plenty of reasons. There are some main characteristics that transform this market into a well defined one that can be very appealing to foreign investors. One of the main reasons is that the market grows on a constant basis; actually, the Cypriot market is one of the fastest growing environments when it comes to the development of real estate businesses. The annual average may reach almost 20% and almost every property price is still lower compared to other European countries.
Another aspect that may be very convincing for foreign investors is the sharp increase that has characterized the golf properties that are available on the current market; the tax rate is lower, thus transforming the entire country into a genuine attraction for almost every investor who is interested in buying an apartment, villa or other real estate in this country. One should not forget about the weather either because every resident of this country can enjoy 340 days of real sunshine a year. Cyprus is an enjoyable location and this country is quite comfortable too regardless of your country of origin. You can expect high standards when it comes to living in a country with good facilities that can even include top class golf courses.
You can live in this country at a low cost and your life will be improved by quality features; therefore, you may choose to make a Cyprus property investment because this investment will prove to be a highly beneficial one. This country even has a low crime rate and its friendly inhabitants are likely to transform the country into quite a desirable place to live or visit. The medical facilities are excellent and if you are planning to develop your own career, you ought to be aware that there are plenty of business opportunities in this country. These business advantages may actually transform the country into a more desirable destination or residence. Every investor will discover a ready market that will provide him with all the necessary opportunities; well administered procedures are likely to secure your future investment when purchasing an apartment, villa or other real estate. Buying property is this country is actually a safe decision for the future.
If you are looking for genuine reasons for making a Cyprus property investment, you may consider the following points because they are likely to be helpful when it comes to understanding the current real estate market that can be found in this country. First, investors will discover that prices are generally lower than other European prices; even the living costs are relatively lower when compared to other countries and the quality of life itself is thus improved. The good facilities are worth mentioning too because the national economy is mainly characterized by stability and robustness. All these features are underlined by the constant and favorable evaluations that are coming from almost every European institution. Even the International Monetary Fund underlines the economic and financial stability of this country.
Cyprus boasts an efficient land registry and this system comes along with well administered and straightforward procedures that are designed to encourage every potential foreign investor. Property purchase has thus been transformed into a safe option that any person may consider for his/her future life experience. Even the legal system encourages all potential investments that are related to the real estate market; investors will also take advantage of some fiscal incentives and they can also enjoy a lower level of taxation.
Special tax incentives are offered by the Cypriot government in order to encourage the real estate field; the country also has one of the fastest growing economies and this aspect may be very appealing to every real estate investor. The strategic location of the country together with the unrestricted access makes this land the perfect location for your future real estate businesses.
April 8th, 2010
posted in Property Investment
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April 8th, 2010
posted in Gold Investment
While rampant speculation may grab headlines in national property markets, improving regulation and increasing transparency are making them more attractive to investors from around the world, a new research study shows. The global Middle East and North Africa (MENA) report from Jones Lang Lasalle, the property investment and advisory firm, found that Dubai was the most transparent market in the region. The emirate has seen a 12-fold increase in transactions since 2002, which is when the emirate opened up the property market for foreigners and began improving its legal structure.
The total value of the transactions at the end of last year reached Dh460 billion (US$125.34bn), up from Dh39bn at the end of 2002, according to Dubai Land Department data quoted in the report. Jones Lang Lasalle estimated that Dubai could see more than 70,000 property transactions by the end of this year, valued at about Dh700bn. The study covers 82 global markets classified into five tiers, with the top tier the “most transparent” and the fifth the most “opaque”. Dubai rose to tier three this year – an area defined as semi-transparent – with Jones Lang Lasalle predicting the emirate will upgrade to a fully transparent tier two market by the end of 2010. “If you superimpose the improvements in regulation on the sales figures, you will see why Dubai has seen a 12-fold increase,” said Blair Hagkull, the managing director for MENA at Jones Lang Lasalle.
Abu Dhabi followed closely behind and is rated the third most transparent market in the region after Saudi Arabia , sharing tier three with Dubai . “ Abu Dhabi is three to four years behind Dubai ’s real estate boom and what they have achieved in terms of transparency is remarkable,” Mr Hagkull said. Attributing the rising level of transparency in Abu Dhabi to the establishment of a Land Regulation Department in 2005 and the emirate’s vision 2030, Mr Hagkull said there was still “a lot to be done in Abu Dhabi” due mainly to foreign ownership limitations.
April 7th, 2010
posted in Property Investment
It looks like another banner year for the triple net leasing market, with demand far exceeding supply in most areas of the country. Thanks largely to the baby boomer population seeking out new types of retirement investments, demand continues to be high, and the demand, for the most part, comes from people who are in the midst of 1031 tax deferred exchanges. And even in light of interest rates trending upwards, cap rates tend to remain low with prices holding steady. Shopping Center Business recently spoke with several companies that are active in the triple net market to find out more about these trends and what we can expect for 2006. Demographic Shift The main reason for the current state of the triple net market is the significant demographic shift of baby boomers moving into their retirement years. According to Bruce McDonald, president of Net Lease Capital Advisors, there are about 75 million baby boomers, the oldest of which are just hitting the age of 60, so there are a lot of older Americans who have built up substantial wealth in real estate portfolios. Their ability to go into the net lease market allows them to avoid paying capital gains tax and move from management-intensive real estate to passive real estate that provides a stable income. “There are a lot of people who have built their portfolios out of single-family, duplexes or triplexes, and they are getting too old to bother with that and now have a yin for a management-free investment that produces a regular cash flow,” says Ralph Bunje, president of Reverse Exchange Services, Inc. “The traditional triple net model for these investors was a single-tenant property, such as a Burger King or post office because it fit their criteria. Now, as a result of this demographic shift, there has been the creation of the TIC [tenant in common] industry.” In addition to a management-free investment, a lot of these retirees are looking for “safer” investments as opposed to the traditional stock market approach. “There are a lot of people who had perhaps previously invested in the stock market or other investment opportunities and feel more comfortable getting into the triple net market now,” says Leith Swanson, president of Prime Net Realty Advisors, Inc. “There are a lot of very wealthy investors — individuals and entities — that are in the market and, at the same time, there has been a shortage of quality investment-grade net lease properties available for that pool of investors to buy. So what you’ve ended up with in the last couple of years is a huge pool of investors that are investing because of 1031 requirements or simply because they’re in the market and they are doing a dozen deals a year.” Though most agree that triple net investing is becoming more and more popular, one person we talked to thinks the stock market still has some appeal. “I think the media has been successful in helping create the perception of the real estate bubble out there,” says Keith Sturm, principal with Upland Real Estate Group. “I don’t think there is a bubble, but certainly clients have been a bit more hesitant about real estate just based upon what they hear on TV. With that, I’m noticing that the stock market has become sexy again. People have very short term memories and have forgotten how their 401Ks turned into 101Ks over the last stock market ‘crash.’ Those memories have been fading, and people are thinking about jumping back in.” Gaining Interest Interest rates on triple net investments may be rising, but cap rates so far have not necessarily followed, according to several people we talked to, and pricing still remains steady. “The demand continues to be strong because folks are simply looking for non-management properties and net lease seems to fit the bill,” says Jay Bastian, senior vice president of acquisitions for Commercial Net Lease Realty. “If treasuries stay where they are or trend lower, I think cap rates will probably maintain their current levels, but obviously treasuries are a driver of cap rates in some respects. Everyone talks about increasing interest rates, but I don’t see the demand sliding because of it; it’s just going to change pricing on deals.” “It’s still an incredible seller’s marketplace,” notes James Dwoskin, president of ICA Realty. “Sellers are still holding tight to prices that were originally put in place at a lower interest rate environment, but there doesn’t seem to have been any movement in the cap rates on the highest credit deals. On the lesser credit deals, there’s always been more flexibility and play in the pricing.” According to William H. Winn, president of Passco Companies, LLC, supply is still constrained and there is more demand by buyers. “However,” he says, “the movement of the interest rate has changed the market somewhat. Rising interest rates have, and will continue, to put downward pressure on yields, and as the trend continues, demand will be reduced on the buyer’s side.” Winn continues: “If sellers do not lower their price expectations, the result will be less transaction volume because buyers and sellers will not be able to agree on purchase price.” McDonald says he has yet to see a change in pricing. “Everyone would think that the cap rates will track interest rates,” he notes. “If interest rates continue to go up, there may be a change in pricing at some point, but so far it’s early. There’s usually a delay anyway, but I think in this market, there’s likely to be a longer delay between the interest rates and the cap rates.” Jonathan Hipp, president of Calkain Companies, takes a similar view. “There’s a lot of activity with tax-motivated buyers and plenty of fresh equity that’s not tied to an exchange,” says Hipp. “Although interest rates have gone up, cap rates have not correspondingly seemed to move in conjunction with the interest rates, so there are some pretty aggressive cap rates compared to what the debt is.” According to Sturm, the lower-priced, quality properties are holding their cap rates, and in the category of non-investment-grade properties that are in the $1.5 to $5 million range, there’s real pressure to increase cap rates. “The trend I’m seeing now is there’s incredible pressure on cap rates, based upon interest rates rising, that is causing a little bit of a slow down in the market until cap rates can adjust to interest rates,” says Sturm. 2006 Market So what effect will the demographic shift and rising interest rates have long term? The great risk is that people are buying at a market high, according to Bunje, but how long that will last is the burning question. “The demographic shift will probably continue to push for this type of investment for the next 10 years, at least,” he says. “But the question is, will these investments be popular and will the demand be there if the housing market should fall apart? If housing values go down, the whole focus is going to have to be on long term interest rates. So you just watch the 10-year Treasury rate and that will tell you what happens in that marketplace.” There are several forces that are going to cause cap rates to ease in 2006, says Barry Silver, senior partner with Silver Willis Investment Real Estate. “For the first time in my experience, investors are not willing to accept such small returns and they’ve turned to the TIC market,” he notes. “And they are being sold a higher current return without giving a tremendous amount of thought to the ramifications of what’s going to happen when the debt adjusts up to the interest rates that they’ll be seeing in 5 or 10 years.” Swanson says cap rates for net lease properties are going to be higher in 2006. “We may not see a fourth quarter that will look as good as the third quarter results are looking. But cap rates historically have lagged behind movements in interest rates, and though cap rates have continued to drift lower in September, October and November, interest rates have been fairly stable overall. But there are some inflationary pressures, and we’ll see an increase in cap rates possibly late next year.” “An average cap rate for a long term triple net property is between 8 and 10 percent,” adds Bunje. “Many of them are selling at 5 and 6 percent today, and that’s largely because of low interest rates. If interest rates go up, then cap rates go up, and as cap rates go up, investors who invested will lose their money because the cap rates will change.” While competition remains fierce, it may be a tougher market in 2006, according to Paul Domb, asset manager for United Trust Fund. “As interest rates increase, the primary players — the large REITs and the CNLs — will continue to do business, and I think a lot of the Johnny-come-lately’s will not be able to compete and will find a very tough market.” Hot PropertyWhat, where and how 1031 investments are being made. With the success of triple net leasing and 1031 exchanges, what types of investments make the most sense these days? Shopping Center Business recently talked to James Dwoskin, president of ICA Realty; Paul Domb, asset manager for United Trust Fund; Ben Simon, partner with The Simon Companies; Leith Swanson, president of Prime Net Realty Advisors, Inc.; Bruce McDonald, president of Net Lease Capital Advisors; Jonathan Hipp, president ofSusan H. Fishman ; Keith Sturm, principal with Upland Real Estate Group, Inc.; Michael Shephardson, executive vice president of Trustreet Properties; and Dan McCabe, president of Investment Exchange Group to find out more about the types of properties and investments that are at the top of the list for today’s investor. SCB: What types of properties are hot for 1031s right now? Domb: From our perspective, one type of property is no better than the other, and we do everything — office, retail, industrial, bank branches, pawn shops, 7-11s, you name it — all single tenant. Simon: On the seller side, it’s the Eckerd’s and CVS’s that are popping out of the ground. If you can get with a builder that’s doing those, then you might be able to get your arms around a newer product. McDonald: All properties are sought after for 1031. I think that what typically separates it is the size of the 1031 buyer in terms of how much money they have to reinvest. On a typical bell curve, there are just a lot more 1031 people who have smaller dollars — $1 million to $5 million — to invest. You have a large volume of smaller retail properties, such as drugstores and fast food restaurants. If you put it in a larger perspective, retail has the most transactions, but it’s not as high because industrial and office tend to be larger deals. Hipp: It used to be mainly retail, but now there is a lot more office and industrial. But I’d still say retail because it’s the most produced product out there — like a 7,000 square-foot Advance Auto or a 3,000 square-foot video store. The most sought-after property is any pure triple net property with reasonable or good credit behind it and rental increases. More than ever, I’m seeing buyers who have to buy something other than what they had hoped for and at yields lower than they had expected. Sturm: The single-tenant net lease, good-credit, well located properties are what’s really selling most today. We do a lot of retail, and it’s what we classify as the minimal management properties. The best-selling ones we see currently are passive real estate investments, where the owner just gets a check on a daily basis. McCabe: There are a wide variety of sought-after properties for 1031s. I’ve seen everything from large industrial complexes that are broken down and the typical semi-regional shopping center to gas and oil interests and multi-tenant office buildings. It almost depends on what the originator can find. I’m seeing a significant number of multi-tenant product, i.e. office buildings, medical facilities. There are too many inexperienced dollars chasing too few good deals. SCB: How hard is it to find properties? Dwoskin: The better properties are very hard to find. There are a lot of lesser credit, specialty type buildings, things like net-leased franchisee restaurant properties — those are always readily available. The harder things to come by are leased properties that are significant assets, such as warehouse distribution facilities, office buildings or well located retail facilities that are leased to investment-grade credit tenants. Over the last several years, most of the high-credit big-box users, like Wal-Mart, Target, Costco, Home Depot and Lowe’s, have decided that they no longer want to be tenants if they can avoid it and want to own all of their properties. So those deals are evaporating; there are very few, if any, in the marketplace. So what’s left of the investment-grade credit deals is coveted, and people will pay more for them. Hipp: Properties are not hard to find; it’s hard to find something that makes sense. It still continues to be a market where, if you see something you like, you’ve got to go after it. Shephardson: We’re very niche-focused and work in two primary sectors – 90 percent of our business is in the restaurant arena and the other 10 percent is just general retail that includes drugstores, banks and convenience and gas stations. We’ve found that because we’ve been in the business for so long and know so many restaurant operators, and because we have a very strong acquisition business in our origination efforts, we don’t have any challenge finding product. SCB: Where are people looking for property? Domb: To the 1031 investor, private ownership is a big factor, so local properties would be key. Credit and the type of real estate are secondary or tertiary considerations. The 1031 investor is hard-pressed to find quality investments. Swanson: We typically deal with clients in the $7 million to $10 million range and above, and the area doesn’t seem to matter, although obviously they’re not buying a lot of property in Louisiana and Mississippi. The driving catalyst behind the growth in the net lease market is the fact that the investor can move across state lines and not be relegated to his own backyard. McDonald: The product is spread across the country; there are certain areas for different product types. Florida and the whole Southeast are big growth areas and so are the western states. Office and industrial headquarter building deals are being done all over — they tend to be in the distribution hubs, such as Memphis or New Jersey. SCB: Are TIC structures still on the rise? Swanson: TIC structures offer the individual investor who doesn’t have $3 million to $7 million an opportunity to jump in, so that’s really propelled the market growth that we’re seeing. McDonald: They are certainly on the rise. In 2001, they did about $160 million in equity and in this year, they’re expecting to do $4 billion of equity — and that’s just on the securities side. So there is obviously a huge demand, and that ties into the fact that the majority of 1031 buyers have less equity and TICs allow them to have somewhat of a passive investment. So it’s clearly a product that there is substantial demand for. Hipp: They are becoming a very popular vehicle and much more publicized and well known. There are a lot of people out there with $200,000 to $300,000, and it’s hard to buy something without taking on a lot of leverage. They would much prefer to partner with a group of others to buy a more quality asset and let somebody else worry about the management. Hipp: The TIC market is certainly becoming more popular, and I think they serve a purpose. But when people start buying properties with interest-only loans so they can cash flow, I think it’s a double-edged sword because when that loan comes due in 5 years, they’re going to be out to the market looking for debt in a different interest-rate environment. I’m not sure they realize exactly what they’re buying. Sturm: We think the TIC structure is really the future for passive real estate investments. The baby boomer generation as a demographic group just turned 59 and a half, and it’s not long until their 401K plans are going to be available to them to start pulling down money on a tax-deferred basis. But what we’re finding is that the quality TIC properties that are investment-grade are able to attract very good financing right now. We’re able to get long term fixed financing in the 5 to 6 percent range, while the 1031 or net lease properties we’re talking about have been financed in the 6 to 7 percent range. Shephardson: TICs have wonderful application in the larger 1031 arena where you are selling a pool of assets or you’re going to sell one large asset at $10 million to $20 million and you want to syndicate it amongst many buyers. So the only thing that’s holding the TIC market back is the potential ruling on whether it’s a real estate product or a securities product. We expect that we’ll be doing TICs sometime in the not too distant future because it expands the buyer’s universe.
by Susan H. Fishman
April 7th, 2010
posted in Investment News
The following is from originally published article at www.gold-speculator.com on February 4th
I’ve been trying to tell anyone, who would listen, to diversify at least some of their assets into gold for some time now. Five years back, the lot of willing listeners was small. I clearly remember my voice going hoarse one night as a mix of beer and fruity margaritas made a b-line straight to my brain and unleashed a roaring spiel on my uninterested friends. As I recall, the rest of the night, I was rather enjoyable, so I make no apologies. We’ve come a long way since then. When I first became interested in the commodities market, I remember very specifically that gold was trading at $375 per ounce, interest in the sector was low and misguided information was plentiful. It certainly wasn’t the bottom of the bear market, which came around the turn of the millennium and was marked by the 400 tonne auction of bullion by the Bank of England at historically low prices around $250 per ounce. Today we’re looking at gold prices north of $900, interest has definitely perked up but misguided information is still plentiful. So it doesn’t surprise me that many of the people who once shunned my message with apathy have now turned to me for advice. Nothing gets a person moving like fear and greed. If you’re worried that you may have missed the train, there’s good news for you. I strongly believe that we’ll see prices upwards of $2500 before all is said and done.
My goal is to try and demystify some of the myths and try to simplify your foray into gold investing, which is no-doubt one of the main reasons you are reading this. So without further ado, let me delve into some of the fundamental reasons why you should own some gold.
MONETARY INFLATION LEADS TO PRICE INFLATION AND YOU”RE WEALTH SHRINKS OVER TIME.
There are several reasons to own gold in the current environment and the most prominent and insidious of these reasons is inflation. I refer to the current inflation problem as insidious because it is in essence a hidden tax on the holders of whatever currency is being inflated. It is a sad fact that the “buttons” to control the printing of more money is unarguably under the control of politicians who have little regard for the long-term economic health of our nation and are more interested in where their next votes will come from to keep them in power. So as a means of protection from the whims of idiot politicians and the throngs of “expert” economic yes-men screaming that everything is alright, there is no substitute for gold as a means of preserving your hard earned wealth.
Let’s delve a little deeper. Two millennia ago, gold was used as a medium of exchange and also as a store of wealth. Back in the ancient roman days, it is said that you could buy a nice outfit and a nice pair of sandals for an ounce of gold. Today the equivalent to an ounce of gold (currently $923) will buy you a fairly nice suit and a decent pair of dress shoes. Let me contrast that with a brief study of history and “money” as we know it now, namely fiat currencies much like that green paper in your pocket. We’ll begin with Germany in the early 1900’s.
“Before World War I Germany was a prosperous country, with a gold-backed currency, expanding industry, and world leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the French franc, and the Italian lira all had about equal value, and all were exchanged four or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper.”
(http://www.pbs.org/wgbh/commandinghe…inflation.html)
Now we’ll jump forward a few decades and slide west to Argentina in the 1990’s.
“Argentina was subject to military dictatorship…for many years, that resulted in a number of significant economic problems. During the National Reorganization Process (1976-1983) huge debt was acquired for money that was later lost in different unfinished projects, the Falkland/Malvinas Islands War, and the state’s takeover of private debts….. new government’s plans included stabilizing Argentina’s economy including the creation of a new currency (the Austral, first of its kind not to carry the word peso as part of its name), for which new loans were required. The state eventually became unable to pay the interest of this debt, the economy collapsed and inflation began increasing. In 1989, Argentina’s inflation reached 200% per month, topping 3,000% annually.” http://en.wikipedia.org/wiki/Argenti…sis_(1999-2002)
And more recently we have Zimbabwe under the criminal dictatorship of Robert Mugabe, where we’ve seen hyperinflation to the tune of nearly 1000% per year. The price of a 2-ply sheet of toilet paper went from pennies to $417. A whole roll now costs $$145,750. History is littered with similar stories of currencies being inflated to worthlessness. The point I want to make with all this is that the root cause of all these problems can be summed into a few bullet points which then leads to the reason for owning gold. And they are:
1. A government exists with an entirely fiat currency, which means that the “money” used as legal tender has no intrinsic value and is enforced by means of law and the threat of punishment.
2. For whatever reasons, the government finds itself in a position where it has entered into more obligations to pay (liabilities) than it has funds to cover payment of. This is known as “bankruptcy” or “insolvency” if you are an individual and business-as-usual if you are a government entity.
3. The government finds that it is easiest to print money out of thin air to cover the obligations it has committed itself to pay for. This is usually the most politically acceptable solution as opposed to cutting spending or raising taxes.
4. The constant creation of money (monetary inflation) leads to a greater and greater supply of “money” chasing after the same amount of goods, thus leading to (price inflation) which I’m sure everyone is painfully aware of.
Previously I referred to inflation as a “hidden tax” on the holders of the currency. You may be wondering why this is so. Well, I believe it is pretty evident to anyone who eats, drives, buys, sells; that the price of everything around us has gone up considerably over the years. Or, a better assessment, I think is to see it as the dollars in your pocket have lost considerable purchasing power over time. (I’m trying hard not to use the word “value” because dollars have no value in and of themselves) This is no accident. The reason is simply because there is more money or “liquidity” floating around the economy and the supply of goods available for purchase has not increased by as much. I should mention, at this point the important difference between “monetary inflation” and “price inflation”. Monetary inflation is a direct result of the government creating too much money, which undoubtedly leads to higher prices for goods and services. But price inflation can occur without monetary inflation. Let’s say for example that a good or service becomes more scarce, and therefore more valuable, then the price of it will increase independently of what the monetary authorities are doing. However, when there is a general and sustained increase in the price of most goods and services, especially basic necessities, we definitely need to take a close look at what the government is doing with the printing presses.
I’ve taken the liberty of dissecting this enormous article into more digestible sections. Please check under the Gold Investing 101 sections for more on this series.
Disclaimer: Please keep in mind that we may or may not have positions in the financial instruments or assets we may write about. We provide our opinions in the interest of facilitating the free flow of ideas, which should not be mistaken for an investment advise. Please do your own due diligence before making any investment decisions. Please read the disclaimer at http://www.gold-speculator.com/index.php?pageid=disclaimer for the full disclosure.
Sincerely,
Markus Shultz
www.gold-speculator.com
April 7th, 2010
posted in Gold Investment
Not only was ‘feel good’ film Mamma Mia a box office huge success, but it has also contributed to an increase in the tourism industry in Greece.
After the crowds had seen the movie- which was released last summer- a lot of people became interested in buying property in Greece. According to The Move Channel the number of potential buyers has skyrocketed by 120 per cent following the release of the movie !
The movie was shot in a beautiful and virtually unknown island- Greek island of Skopelos where there is not even an airport !
Since the release of the movie more and more internet users have been looking for property investment opportunities in Greece. There has also been a dramatic increase in the number tourists who are looking for a low cost holiday destination, where the sun is often shining and the temperature is warm.
Greece takes advantage of a pleasant climate and a very low cost of living- two very important factors which is attracting many tourists and potential buyers.
The potential buyers can get a very profitable property investment because property prices are relatively low-cost. In addition dynamic tourist industry means that, you can rent out your property during the long season- from April to October- and get a high return of your investment.
According to Paul Simmons, Easyjet UK General Manager, the low cost of living and the affordable property prices will encourage you to invest in Greece, even if the world economy is in a recession.
April 6th, 2010
posted in Property Investment
Until recently gold prices have been on a tear. After decades of going nowhere, gold has had a year of steadily rising prices, that is until two weeks ago. It appears the hedge fund investors who bid the price up, have decided to take their profits. Gold prices plunged and many financial analysts have proclaimed that the bull market in gold is over. Is it?
Price charts are one way to look at the situation, however we need to dig deeper into the fundamentals to see what the prospects are.
As the hedge fund investors have dumped gold, there is evidence new hands are coming into the market. As some investors leave, and new ones replace them, the volatility in gold prices will remain high. What we need to ask is are these new investors speculators or is there some fundamental reason new investors are coming into the market?
Lets start by looking at the retail investors. One important component of the price of gold is the retail investors in India, China and West Asia. Traditionally these investors have bought gold in the form of jewelry. Jewelry demand in these countries does have an impact on gold prices. The significant point here is investors in these countries are now accumulating gold in forms other then jewelry. In 2005 the investment demand for gold in these countries has risen from between 20% and 34%. The strong demand continues into the first quarter of 2006. During this same period of time, demand for gold related Exchange Traded Funds has risen 23%.
India is the largest buyer of gold in the world. Indian investors will soon be able to buy gold ETFs on Indian Exchanges. There is also a strong demand for investing in gold coins in India.
China has not had a strong interest in investing in gold for anything but jewelry. That may be about to change. The government is easing regulations that may encourage more investment in gold products.
Interest in gold investments is also increasing in Thailand. Demand for gold investments in that country has been hovering around 10%-15% until 2005. In the past year investment demand in Thailand has risen to 35% for gold.
The supply of gold remains tight. The demand across Asia is increasing. It is likely we will see supplies tighten even more which will again begin to drive up prices. The next wave up will look different. After having seen prices plunge, investors are likely to take profits much quicker this time around. Prices will begin to go up again, however there will be significant pullbacks as investors take profits.
Gold investments will also continue to be fueled by Energy price increases, increased inflation in the US and world tensions. Federal Reserve Chairman Ben Bernanke said that growth in the inflation rate could be worse than expected. After that remarkstocks in US markets dropped. This could bring investors back into gold.
Several financial experts in India are looking for gold to go to $770- $800 by the end of 2006 or beginning of 2007. Currently the price is around $635 an ounce. It is not clear if we are at the bottom prices yet. Prices will rise, but this ride will not be for those with weak stomachs.
April 6th, 2010
posted in Gold Investment
Most people, at least, in the West, know that art can have value. After all, they have been reading about Van Gogh, Picasso, or Klimt paintings selling for millions of dollars for decades. However, most people do not know that you do not have to be a millionaire to invest in and make money from art. Art is simply another investment asset class that savvy investors include in their arsenal. Therein lays the key to understanding.
The sad truth is, also, that most people who invest in the more common investment assets, like stocks and bonds, do not understand investment in those more common investments. I always hear people talking about “playing the market”, yet, as any professional investor will tell you (it just so happens that there are so few that odds are that you never met one), although it is a game, it is not a game for novices.
The first person to formalize a mathematical framework for economics and finance was John VonNeumann, a mathematical physicist, who invented game theory as the basis for studying those fields, in the early part of the twentieth century. Indeed, until the 1980’s, most of economics and finance sprang from this basis, and the focus was to assume, just like in playing dice with perfectly symmetrical cubes or flipping a so-called fair coin, that investment was a fair game: there was equal probability of gain or loss and the distribution of outcomes was the bell-shaped curve.
Since the 1980’s the behavioral school has gained ground, in the theoretical realm, by assuming that since people are not perfectly rational, we should examine the actual behavior of people in business and investment situations. Of course, that is something that investment professionals have been doing for centuries. Dow and Jones, in the 1880’s, said, for example, that at market tops the professionals are already well out of the market. After a crash, which will always happen because emotional human beings are markets, professionals quietly begin to buy. Their buying, eventually excites technical market analysts’ technical market indicators, which are somewhat based on supply and demand analysis, in real markets, and technicians begin to buy and recommend buying. Eventually, the general public catches onto this news, which is really very old news, and they jump onto the band wagon. Everyone tells everyone how smart they are and how much money they made yester day trading on-line. Meanwhile the professionals have begun to quietly exit the market. A peak comes; a crash comes. Then, all of those self-proclaimed investment mavens console each other and support each other in their ecstasy turned agony. Some run to the authorities and claim that they were duped because they did not understand the complex nature of the mini-bonds that they bought: translation – they were so greedy when they were told that they could make unbelievable returns, and they did not want to hear about the risks. Another lesson that the theoreticians finally came to admit after the stock market crash of 1987, which, statistically, should not have happened in the whole history of the solar system, was that the distribution of returns is skewed with a longer tail on the down side.
It will be beneficial to understand the basic framework of a market, investing, and basic economics. Economics assumes that people are self-interested. Its only fault is that it assumes that people follow enlightened self-interest: no greed, lying, or cheating. Finance says that there is a difference between price and value: value is what someone thinks that something is worth, while price is the amount that someone actually paid for something. People make markets. A market is not, necessarily a place, like the New York Stock Exchange. Indeed, many people do not even realize that the NASDAQ market is not like the NYSE, it is simply a network of dealers, connected by computers, who maintain bid and ask prices for NASDAQ stocks. This is referred to as a dealer market or an over-the-counter market (OTC), as opposed to the NYSE, which is one physical exchange through which all orders to buy and sell are funneled. In fact, many people do not even know that the NYSE is a very special exchange, in that all of the stocks on the exchange are assigned to specialists who are the only one that you can buy a particular stock from. The specialist maintains an order book of bids and offers, and he has the ultimate in information about supply and demand for his stocks at any moment in time. As part of his job as a specialist, he can invest his own capital, in his stocks. All the other layers of the business that deal with the investing public, after that, are in marketing. A stock broker, for example, is just trying to make commissions when he calls you with a hot tip. Even at the level of institutional sales, salesmen, analysts and block traders are just trying to get commission dollars. None of them risk their own capital. There are also investment bankers who help companies raise capital by issuing new stocks and bonds, and there is a large market effort accompanying that. An underwriter might risk his capital by agreeing to underwrite the deal at a price for leftovers and may support the stock, in the secondary markets, by buying for a month or so.
So, let’s look at the art market. A market is where supply and demand sort out price and volume. Art buyers, collectors and investors make up the demand side. Retail investors are smaller buyers of art, while high-net-worth individuals, trusts, corporations and museums fulfill the role of institutional investor. Art dealers act as brokers, dealers, and investment bankers for art. They act as brokers by taking consignments for sale or request to buy from customers. They buy and sell art for their own account as dealers. By taking on new, undiscovered artists, by having shows for artists at galleries (much like the road show investment bankers do for IPO’s of stock), and by acting as agent or dealer for an artist, they fulfill a role, much like investment banker. Ultimately, supply is limited, depending on the artist. Once an artist is dead, supply is fixed.
Value begins, as in all of economics, with scarcity. It is the same principle that drives the precious metals market, the crude oil market, and the art markets. As with anything else, quality also plays a role in determining an appropriate price. However, also, like with many other things, including any type of investment, marketing plays a major role. Galleries, dealers, and art critics try to tell people what is good and what is bad art. Sometimes, I wonder about their opinions. Other times I have benefited, as in the sale of a table made of roots onto which birds were carved, and as one of only two found examples by this unknown folk artist from the 1800’s. Sale of the table brought over $4,000, back in the mid-1990’s. These art market analysts play the same role as securities analysts, in the stock and bond markets. They might even make buy and sell recommendations, and they might estimate values of artworks. Since art is supposed to make you feel good, your basic starting point should be to look to buy things that you, personally, like, then, check out the price.
In the securities markets, smart investors value things on a comparative basis. Instead of trying to figure out what prices or returns should be, stock analysts use comparative P/E ratio analysis, comparing one company to other companies, in the same industry, and comparing P/E’s of stocks and industries to those of the general market. In bonds, the yield-to-maturity (YTM) of a bond is compared to current market YTM’s of bonds of the same company and to general bonds with similar maturity, coupon rate, and risk. In the same manner, the value of works by an artist can be compared to one another and to those of other artists. Normalization, in the context of paintings, involves an artifice: converting prices to price per square meter or per square inch. One might make similar size normalizations for, e.g., teapot art and sculpture. However, price per unit of size might vary over an artist’s work with larger ones, perhaps, trading for lower price per unit of size, and their more famous works trading at higher price per unit of size.
Having built a comparative pricing system for art, one can compare the prices of one artist to another and the average prices of one artist over, a school, a movement or a period by construction single artist or composite price indexes and looking at their evolution over time. That also allows you to calculate returns since return is defined as the percentage change in price over time. You can compare prices from galleries, which is the retail market. The next layer of the market, much like in other investment markets, is an inter-dealer market. The final layer is the auction market, which in some respects is like the exchanges, in the securities markets, but it is a stop-out market: a market of last resort for sellers. The auction markets are more fragmented than the auction markets, in securities; they are not open every day, either, unlike their counterparts in securities. Price information of one sort can also be garnered from the auction markets for artists for whom there are auction records. There are also research and information services, in the art markets, mirroring similar services in securities and commodities markets.
I bought my first piece by a famous artist, Joan Miro, in the mid-1980’s. I was surprised to find that the price was only several thousand dollars. By the time that I bought my third Miro, I had learned about and used information from the auction record to pay the proper price. In succeeding years I bought art by many famous artists. Although the art that makes the headlines makes it seem that all art is out of reach of the man on the street, you will be surprised to find out that art by many known artists, past and present, is not that expensive. Another little known fact is the good returns that can be made in art, especially when one approaches the market with the tools and techniques as one would in any other investment asset market. During my decades of trading art, in the U.S., I cannot recall a time when I lost money, and returns have always been exceptionally good, especially when compared to returns of other investment assets. I can even recall times that I have continued to earn a profit, in art, even during downturns in securities and real estate markets.
Now, we are investing in and have set up a dealer in Chinese art. I moved to China four years ago to teach finance and economics at South China Normal University. I have been immersed in the Chinese social and economic scene, and I have concluded that the best current market in China, today, is the not the export market or the stock market or real estate, but, instead, the art market. Returns, in art, in China, have been above twenty percent per year over the last decade, in local currency, and the continued undervaluation of the Yuan versus foreign currencies, coupled with other socio-economic factors, make investment, in this market, appear to offer good opportunities over the next several years, especially for foreign investors.
Up through the 1970’s and early-1980’s, investment in stocks and bonds seemed outside the reach of the man on the street. By the 1990’s everyone and their brother was trading stocks on-line through discount brokers. Now that we are in the twenty-first century, the next time you think about art, remember that it is just like any other investment asset, like stocks, bonds, and commodities, it is not outside the realm of investment possibilities for the average investor. Think of the analogies that we have laid out between art and securities investing and markets. You can also find out more information about investment, art, China, and investment in art in China on various parts of our website.
February 24, 2009 Craig Mattoli, CEO, Red Hill Capital, owner of Leona Craig Art, Guangzhou, China
April 6th, 2010
posted in Investment News
Gold has always had its place in many investor portfolios seen as a sef bet carrying intrinsic value. But the precious metal frequently returns to the spotlight in times of financial turmoil. In our latest BizChina 360 series, we look at gold China, its fledgling market, its production, and investment.
Our first installment, we look at dramatic developments over the last 8 years.
In 2007 China became the largest gold production country in the world-toppling South Africa from a position it had heldfor over a hundred years.
It’s an exciting new century for China’s gold market. That’s because in 2007, China became the largest gold production country in the world-toppling South Africa from a position it had held for over a hundred years. China’s gold consumption also grew multifold, and now ranks 2nd globally. And experts such as precious metals consultancy GFMS limited are confident, that the positive trend will only continue.
Philip Klapwijk, Executive Chairman of GFMS Ltd. said “The China market in 2008 will probably be the world’s largest physical gold market, supply, demand, consumption. China will be the world’s largest gold market in 2008; that tells you the significance of the China market.”What may be even more startling is the fact that it has taken less than a decade for the country to get here. Previously, gold was managed under the old system of “unified purchase and allocation”, and was strictly controlled by the central government. The development of the gold market was stagnant, at best.
But 2000 proved to be a pivotal year. Everyone in the gold industry hailed the Chinese government’s move to include opening up the country’s gold market in its 10th five year plan. The basic goal was to gradually loosen control of the market by establishing a new system for gold production, circulation and healthy consumption through market dynamics.
Gu Wenshuo, General Manager of General Office of Shanghai Gold Exchange said “The reform of the gold market was very critical. That’s because gold represented not only a commodity, but also a financial function. It was also related to the country’s gold reserve, and many other issues. As a result, China focused on reforming its gold management system. Under those circumstances, we did thorough investigation of the market conditions, and learned from the experience of other countries. On such basis, the State Council ratified the People’s Bank of China to establish a gold market to adjust gold resources.”So at the turn of the millennium over 20 years after China began to shift towards a market economy, the country finally launched its market reform for the gold industry.
The first step was establishing the Shanghai Gold Exchange, which formally opened for trade in October 2002. For the first time in China’s modern history, the country’s gold price was fully determined by the open market.
Enterprises were no longer confined with limited volume. They were free to buy or sell gold through the exchange, and at a price that was determined by the supply and demand of the precious metal.
The opening up of the market injected vigor into China’s gold industry, and significantly boosted development of mining, manufacturing and investment, and many other aspects. But there was a catch. In the early days, the Shanghai Gold Exchange was offering only spot transactions. As a result, most of the market players were gold miners, jewelry merchants, and other entities engaged in the gold industry. Gold investments such as gold future products were not available. In contrast, 97 percent of the worldwide gold trade was gold futures. So-that led to more development. “But it was not until 2004 before the country came out with more clear guidelines to develop the gold market. Speaking at an international gold summit that year, China’s central bank governor Zhou Xiaochuan spelt out 3 targets for the sector, applauded by many industry insiders.
Liu Yuning, Senior Vice President of Jingyi Gold Co., Ltd. said “The central bank governor Zhou Xiaochuan said the yellow medal should evolve from a solely consumable to investment product, while its trading should change from spot transactions to gold derivatives and move from domestic markets to overseas. From 2003 to 2008, we can see gold transforming into an investment product. When we talk about gold, many will now not only think about gold jewelry, but paper gold and gold trading at the exchange.”For the second target, there have been a lot of changes undertaken through years. After research and preparation, the Shanghai Gold Exchange first launched T+D products in 2004, (which allow investors to bid first but delay the spot transaction of real gold), as a stop-gap to gold futures. The breakthrough came in January 2008, when the Chinese Securities Regulatory Commission ratified the Shanghai Futures Exchange to launch gold futures products.
Li Wenfeng, Trader of Huaxia Bank said “The move has significant meaning. China ranks among top gold producers, but has little impact on gold prices. The launch of gold future is an important complement to China’s financial system. If we further relax controls on gold import and export, we will have more say in pricing the precious metal. Gold future is a good start. For individual and corporate investors, it is a new alternative.”Another important step has been combining the domestic market with the global gold market. The People’s Bank of China gave the Shanghai Stock Exchange the go-ahead to include 5 locally incorporated foreign banks in its membership this June. The Standard Chartered made a Chinese-style debut on August 8th by trading 88 kilogram gold at the Shanghai stock exchange. It hoped the 4 “8″s will bring luck to its future development in China’s commodity markets.
And with current economic climate in such a turmoil, gold has never looked better.
Wang Lixin, GM of World Gold Council of Greater China said “With the increased income level of the population, with more mature of the gold market, with more products availability in the market place, in terms of the unstable financial market and a weaker US dollar, maybe some concerns about the global currency. We believe consumer will have the interest to buy gold.”"I am now at the People’s Bank of China, which serves as the only management of China’s gold system. However, it has now taken off from here to evolve into a very robust market. Many would say recent developments in China’s gold market has been staggering. People may ask how has this happened so quickly? Many credit the country’s macro-economic environment: China’s opening-up policy. The question now is, can it be sustained? Even though experts are bullish about the country’s future gold industry, China’s increased integration with the global economy does make it vulnerable to its highs-and its lows. But the fact that more and more people are turning to gold as an investment channel could spell an even brighter future for China’s gold industry. ”
April 5th, 2010
posted in Gold Investment
Buying real estate overseas is a rather difficult thing accompanied by many organizational details. If you have not purchased any real estate overseas so far, you should know that there are some specific tips you can use in order to not get in the hands of swindlers and in order to make your overseas property investment safe and easy to handle. You can of course apply for the help of local realtors and real estate agents. There you will find the most up to date information and the most profitable offers. Try to escape the offers, which can lead to a perilous investment and negative consequences for your business.
First, you have to invest in real estate only if you want to and to purchase what you want to purchase. Question yourself, why do I want to buy that property? This decision is one of the most important because it is crucial to how much you expect to get from your investment. Do you invest in order to have short term capital gain? Or you invest only to obtain a long term stabile returns? Do you buy the property in order to use it for your own personal purposes such as holiday home or a place for living with your family? What ever might be the answer to this questions, you should manage your funds very carefully and to make the money work for you and for your future. The cost of overseas property investment can vary, from less expensive to extremely expensive. Plus, taking into account some more facts you will make the right choice.
Avoid the hard sell. Do not get trapped by the offers of real estate agents. There are many dedicated overseas property investment exhibitions which display usually the best and the most expensive properties. You should stay constantly focused if you have your original idea. If you want to increase your capital appreciation you better make a purchase in an up-and-coming area. If you made up your mind for overseas property investment, you should take into account where to buy it. For example, such countries like France, Italy and Spain offer many fashionable estates, but of course, the prices are higher than in other parts of the world or even Europe. So you should take into account that the prices for the real estate in that part might not climb rather high, so you might be disappointed by the returns you get. Purchasing in a less-fashionable area of Spain, France, or Italy or in the up-and-coming real estate markets of Croatia, Turkey, Bulgaria and some other countries, where prices are rather low, but the chances these prices to increase are very high, and if the real estate in that region will increase it will increase with a very good rate. Do not hunt hotspots, or fashionable areas, because you could be disappointed by the final returns.
April 5th, 2010
posted in Property Investment
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