Know Thy Tier: Investors Should Rethink the Sourcing of Residential Deals in China’s Second and Third-Tier Cities.
Many investors believe China’s real estate sector is abundant with opportunities supported by strong and attractive market fundamentals. To a large extent, this thinking is true. After all, China’s GDP is still growing at almost double-digit rates (forecasted to be 9.2 percent for 2011) while most of the developed nations are battling their way through different challenges. When it comes to the real estate investment opportunities in China, the residential sector in second-and third-tier cities will, almost by default, make its way into the minds of CIOs globally. Traditionally speaking, sourcing residential deals in second- and third-tier cities has always been much easier than searching for quality opportunities in first-tier cities such as Beijing and Shanghai.
However, what exactly are second- and third-tier cities in China, what are the opportunities, and how should an investor invest in the sector to extract solid risk-adjusted returns? This is a c