Disaster lurks for some investors at Cityscape Global

Posted on 02 October 2010 with 1 comment from readers

This week the popular regional property show Cityscape Dubai opens under its new title Cityscape Global. The change of emphasis is practical given the real estate slump in Dubai over the past two years. But investors should still be wary of making similar errors of judgement in other emerging markets.

Apparently Cityscape Global will showcase investment opportunitities in Libya, Egypt and China as the brightest stars this year. Cityscape group director Chris Speller told Property magazine that  investors can expect 40 to 60 per cent annual returns compared to ‘only’ 12 per cent in developed markets (please can any reader tell us to which developed market this might be referring?).

Promoters not advisers

Well, that is what is being promised by the promoters. They are sales people and you can choose to believe their claims if you like. But have the so-called serious investors that Cityscape seeks to capture learnt nothing from their recent experience in Dubai?

It is only two years ago that Cityscape Dubai was full of salesmen and particularly women hooking investors into their no-can-lose, big-return investment schemes. Is it really going to be different in Libya, Egypt or China?

The Libyan regime has certainly changed its approach to foreign investors but the regime itself has not changed. Egypt is just as mired in bureaucracy as ever and the ownership title for foreigners is far from clear, and that may never change.

China crisis?

China is the ‘next Dubai x1000′ if you listen to the ‘King of the Shorts’ Jim Chanos, the billionaire hedge fund manager who made another fortune shorting subprime. He thinks China is an investment bubble just waiting to explode, and points to the fact that more than 50 per cent of  growth is now coming from construction and real estate. That sounds like Dubai two years ago.

So if you are looking for the next big thing in real estate where do you go? The global focus of Cityscape this year is understandable as the local opportunity seems to have past and the world is a big place.

Actually investors ought to be looking at the most depressed markets and thinking which of them has the best recovery potential. Some markets are still clearly on the way down, like the UK with its austerity government.

Seeking global opportunity

But some global property markets have fallen a long way, and cannot be far off a meaningful bottom. What about the USA where prices have been falling for four years? What about Dubai with its 50 per cent price crash?

You always need to buy cheaply to make a success of property investment. Overpaying never works and speculation is almost always a disaster unless you get in early. But you do not have to buy at the absolute bottom, just near to it.

Your might find such deals now in places like the USA and Dubai, where the economies are bound to pick up in the end. But rushing to buy in the latest investment hot spot is plain foolish.

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