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Buy Property Stocks, Not Physical Real Estate

Wednesday, 14 Jan 2009 | 10:31 PM ET

Property prices have suffered dramatic losses across the globe as the financial crisis deepened and growth ground to a halt in many countries.

With this downtrend set to continue in 2009, a viewer email asking whether it is time to be investing in real estate, was posed to an investment expert on CNBC Asia Pacific's "Protect Your Wealth".

Buy Property Stocks Over Physical Property
Investors would be better off buying property stocks rather than buying physical property at this juncture, says Terence Khoo, Asian fund manager at Sofaer Capital. He explains why in this installment of "Protect Your Wealth".

"You are much better off buying property stocks rather than physical property at this juncture," answered Terence Khoo, Asian fund manager at Sofaer Capital.

(Watch interview at left)

"Equity markets are generally at a huge discount to physical markets," Khoo said, adding that depending on where you are, you could see huge discounts of between 50%-70%.

Khoo also said that he was keeping close tabs on China as more companies were thought to be going bust in the past, and as a result, were trading at 80%-90% discounts. Even though they have recovered, Khoo noted that the markets were still pricing in 70%-80% discounts.

That is why Khoo said he prefers to put his money in China as cheaper opportunities can be found compared to other markets, like Australia.

"Australia is facing some challenges...the financial companies are still quite leveraged and they have to de-leverage...Australia still has more challenges in terms of winding down their mining sector."

Though Khoo says his firm is not terribly bearish on Australia, they are shorting the market as a hedge.

Comments? Questions? Send them in here.


Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."