If China’s economy is considered hot (11.9% GDP growth in the second quarter), then its real estate market is even hotter. In the past couple of months, property prices in sections of Shanghai and Shenzhen have shot up an eye-popping 30%!
China’s real estate industry has expanded rapidly in recent years due to several factors: the growth of the Chinese economy, an accelerating trend towards urbanization, an increasingly affluent urban population and governmental reforms in the real estate sector.
China now has more than 50 cities larger than Chicago, the third-largest city in the United States. And millions of migrant workers are flocking into Chinese cities, which mean that the number of urban hubs could double in the next decade. China’s urbanization and its overall increase in prosperity have created a demand for higher-quality housing.
To top things off, overseas Chinese have invested heavily in the Mainland’s property market to increase their exposure to yuan-denominated assets—something I highly recommend. The yuan has rallied about 8% in the past two years, helping drive up real estate prices. This has also contributed to the greater demand throughout China for condominiums and houses.
But up until very recently, it was difficult for foreign investors like you and I to get a piece of China’s scorching-hot real estate market. The Chinese government has established complex restrictions on foreign ownership of real estate in China. And if you’re lucky enough to be allowed to buy property there, you must go through pages and pages of red tape.
Investing in Mainland China’s real estate and property stocks was also difficult. For the longest time, there were no Chinese property development company ADRs listed in the U.S., and Hong Kong-listed property stocks are not easily accessible to American individual investors.
All of that changed in August, though, when a new IPO came on the scene.
An IPO Rife with Profit Potential
One of China’s top real estate marketing and brokerage companies got listed on the New York Stock Exchange recently, and I jumped at the chance to add it to our China Strategy portfolio. In the three short weeks that we’ve owned it, shares have already gained more than 44% for us. Click here to get immediate access to my buy instructions on this China Strategy recommendation.
This company provides primary real estate agency services, secondary real estate brokerage services as well as real estate consulting and information services in China. I like it because its scope of services is broad, and it has good brand recognition and a strong geographic presence.
As an early mover in China’s real estate services sector, this company has experienced significant growth since its inception in 2000. In the past two years alone, it has become a leader in Shanghai, one of China’s fastest-growing property markets. Now the company has over 2,000 real estate sales professionals in 29 cities throughout the country.
The growth rate of this real estate business is impressive. Sales grew from $12.3 million in 2002 to $31.2 million in 2004 to $56 million in 2006. That represents an average growth rate of 34% each year. Net income has also soared. Income went from $3.5 million in 2002 to $5.6 million in 2004 and then $18.1 million in 2006. That’s more than 400% growth in just four years!
To top things off, the company has impressive profit margins and strong financial backing. Last year, profit margins came in at 44%. And legendary Silicon Valley venture capital firm Sequoia Capital, which made its fame and fortune by backing Cisco Systems, Oracle and Apple, is the primary backer of this Chinese property services giant.
Based on its past financial performance, I expect this company to report extraordinary revenue growth of 100%+ this year. Interested in learning more? Click here to begin profiting from this real estate play right away. Don’t miss out on one of the fastest-growing sectors in China!
I’ve just released the November issue of China Strategy. In it, I talk about a phenomenon that’s growing both in China and around the world: inflation. Inflation can take a serious bite out of your profits if you’re not careful. That’s why I’m recommending a new stock to take advantage of the increasing prices of commodities and agricultural products. Join us today and be among the first to learn the details on this exciting new inflation-beater. I’m expecting this stock to hand us gains of 40% or more by mid-2008.
