Shanghai Property Back in Vogue, by Denis McMahon

Chuckled when I read this bit:

The Shanghai branch of the China Banking Regulatory Commission said foreigners and nonlocal Chinese accounted for 34.4% of all residential-loan recipients in the city in June, up from 24.7% in December.

In July 2006, the government introduced rules stipulating foreign individuals could buy residential property only for their own use and only after they had lived in China for one year. Those rules were aimed at preventing foreigners from buying multiple properties for rental or resale.

Given limitations on foreigners buying Chinese stocks and bonds, real estate has been one of the few yuan-denominated assets in which foreigners can speculate on the Chinese currency.

“Even though some of the properties may end up with low rental yields, that’s fine as long as investors sustain the daily cost of the property,” like management fees and mortgage servicing, Mr. Eric Lee of Savills Property Services said.

“Hold the property for five years and between yuan appreciation, rent and asset appreciation, you could have an almost guaranteed return of 8% or 9%” a year, he said.

Whenever I hear the words “an almost guaranteed return of…” I put one hand on my wallet and begin to sprint.

Hold the property for five years and among yuan depreciation (due to social chaos), constant vacancy and asset depreciation (due to disrepair and paying a stupid price in the first place), you could have an almost guaranteed loss of 8% or 9% a year.