With all the hype surrounding rapid real estate growth in 2nd a 3rd tier cities, 4th tier cities have been largely ignored. The capital required to buy commercial or residential real estate in 2nd and even 3rd tier cities is absurdly high; certainly out of my league. Prices in 4th tier cities, however, are much more viable. Advice on buying real estate from a veteran property developer:
Another tip: investors must follow different advice when buying commercial versus residential real estate, especially in China. For example, Liu explains that while a low selling price may boost the attractiveness of a residential property, it may not build sales for a commercial venture if the location is unsuitable. A better measure of the value of a real estate purchase, Liu explains, is to try to foresee the future. Says Liu: “When investing in real estate for the long term, land price is not the most important factor because return is calculated based on the business effect, i.e. average return and liquidity. The key is to predict how much the value of the property will increase after 10 years.”
I think with some thorough research, one can predict, with some degree of accuracy, those smaller cities which will be at the forefront of economic development in the next decade. Anhui Province itself, due to its location, is poised to see significantly increased development.
“With the rising wages in the coastal region, as well as the rising importance of the domestic market in inland provinces, we believe that there will be major moves by companies to relocate their production bases into the inland provinces, with cheaper production costs and easier access to the inland markets.”
It is difficult to determine, at this point, which cities hold the most potential for investing in, but I will keep researching.
