“The yuan is a lightning rod for changing sentiments about currency,” Brian Kelly said at his fund’s annual investor conference in Manhattan yesterday.The hedge fund manager of Asian Century Quest cut through the hype and pointed out numbers that suggest Chinese real estate is not in a bubble mode.
The main point Kelly made is that real GDP in China has risen faster than RE asset prices, but there were few key points about why he’s positive on Chinese real estate that also stuck with us:
- Chinese real estate doesn’t look like a bubble. Housing prices are only really high in Beijing and in Shanghai. In Guanghuan, housing prices have have not risen much in the past few years.
- Chinese real estate looks positive. In 2007, around 32% of the nation’s population were looking to buy homes. Now that number is more like 56%.
- Much of the RE growth is from government programs aimed to stimulate the housing market. They don’t see these programs ending anytime soon because, they say, the Chinese government has an unlimited capability to stimulate the buyer.
One of the most interesting charts we saw throughout the presentation compared China’s industrial output to their agricultural output.
Where their industrial production has grown steadily, China’s agricultural output has more or less plateaued. The Chinese will only get healthier and for example, they will need a more diverse diet that includes more protein that they will not be able to produce. Kelly understood this data comparison to mean the future market looks positive for soft commodities.
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