As the global financial crisis looms, there appears to be a ray of hope in specific property markets according to billionaire real estate mogul, Sam Zell who has highlighted Brazil, Egypt, Mexico and China to being some of the best destinations for property investments at the moment.
The key fundamentals of the investment prospects of these regions, pointed out by Zell are the shortage of affordable housing and infrastructure that support foreign investment.
Zell’s basis for investing in property in Brazil is it’s self-sufficiency, it’s strong pool of skilled professionals and it’s otherwise unlimited natural resources. His company, Equity international owns shopping malls in Brazil that have had a very healthy return on investment of 12 percent in the last 12 months. He also pointed out that Brazil’s biggest mall operator was seeing retail sales growth of 10 percent annually.
“If you look at all of the facts, I don’t think there is a better environment in all the world than Brazil,”
Zell has even suggested that Brazil could surpass China in economic might in 30 years!
In Egypt, Zell pointed out that similar conditions hold true, where “there is an enormous shortage of housing,”
Zell opinion about the Brazilian and Mexican housing markets is that they are largely unaffected by the current credit shortage in the global capital markets that has frozen or dampened housing in the rest of the world.
Interestingly, Zell said he is currently investing in low-cost housing in China, where results have been “so far so good.” (Notice he is avoiding the ‘luxury’, ‘high-end’ segments that are so far over-supplied in first-tier cities)
Artificial Housing Demand in the U.S. and Europe
Much of the current financial turmoil emanates from artificial demand supported by extreme leverage in the U.S. and Europe. True demand in economies such as Egypt, will have to re-emerge to lead any recovery elsewhere, he said. “Where is (the market) going to recover? It starts with demand,” he said. “Where demand overcomes the environment.”
Avoid Japan, India, Russia & Turkey
Countries to avoid an the moment include Japan, with a shrinking population; India huddled with bureaucracy and licensing ‘beyond belief” that actually discourages foreign investment; Russia where tax authorities could literally steal companies from their owners, and Turkey, where he fears authorities could use the press against foreign investors.