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My "big picture" view to speculating in real estate is summed up in Chapters 24-27 of Crisis Investing For The Rest of the 90's. In brief my argument is that vastly improving technology has made it unnecessary to be in or near the cities to work. And you don't want to be near them anyway; they're crowded, dirty, highly taxed, and socially explosive. Rich people will increasingly locate out in the countryside, but not, obviously, just anywhere. They'll go where the scenery and climate are beautiful, but also where there is enough infrastructure to offer some of the advantages of the big city. Make no mistake, there are plenty of disadvantages to investing in property. But land is a likely beneficiary from current trends in technology. And although a government can always steal it from you, at least it can't just evaporate, like stocks or currencies can and do. The template for this trend is, as I've long said, Aspen, Colorado - The best time to buy straw hats is the winter, and the best time to buy property is during a financial crisis. I was in Indonesia and Thailand during April with the intention of doing some bargain hunting. Indonesia isn't so much a country as an empire, composed of about 16,000 islands populated by around 200 million people. Although it was clear to me the real bargains would be in Jakarta, I decided to pass. The city is a dump, where I've no desire to be in the best of times, and with the army running around shooting rioting students, and the general population warming to a cyclical purge of the ethnic Chinese-well, you have to draw the line somewhere. It seemed to me that Bali, the next island east of Java, but with a totally different culture, might offer a good compromise between risk and reward. I spent a couple of days driving around with brokers, trying to make them understand what I wanted: something large, private, on the beach, and absolutely first class. I won't bore you with the details; I found a couple places that would make the cut, but even after the collapse of the rupiah the prices didn't impress me as a bargain; you actually get more for your money in Hawaii these days, thanks to the Japanese exodus. The problem is that Bali is entirely driven by foreign, mostly European, money; it's insulated in many ways from the rest of the Indonesian economy. Food and labor are truly dirt cheap, but the foreign influence is too strong. Property owners think in dollars, not rupiah. The next stop was Phuket Island, Thailand's premier beach resort. When you see the travel posters from this country with incredibly beautiful rock formations, white sand beaches and crystal clear water, they were all done in this area. Incidentally, I far prefer it to Bali, which is awash with over-priced mega-resorts, hotels indistinguishable from those on Miami Beach, unless you go far into the interior, where there's basically nothing but villages. Unfortunately, although Phuket prices were more realistic, i.e., off about 30% in the last year, there were still no bargains, again because the market caters heavily to Europeans. My advice is that if you want a pleasant vacation in either place, you reserve at an Aman resort. You'll pay $500 a night, about triple what the abominable Hyatt or Sheraton chains get, but Aman hotels are far above whatever is in second place (probably the Four Seasons); it's worth the money, assuming any hotel room can be worth that much. I then went to Bangkok, a hot and crowded place, but my favorite city in this part of the world, probably even ahead of Hong Kong. Poor planning got me there in the middle of the Thai New Year, which meant everything was shut down for a week, and I didn't get a chance to see a lot of property. On the other hand, the whole city goes wild with a water festival; you walk down any street and after five minutes you're completely soaked from squirt guns and buckets of water thrown at you, day or night. It's great fun. Bangkok reminds me of L.A. without the social problems. If you're thinking of living in the Orient for a while, this is the place. I'm in touch with a number of property brokers in Bangkok, and will give you specifics in the months to come. There must be a hundred tall, see-through buildings, that can be had for a fraction of replacement cost. I don't see any particular rush to buy, however, because the financial meltdown here isn't over yet. But it is time to start looking so you know what to buy when the bottom arrives. Even at present prices, however, it seems that a I 1% per month triple net return is available. Return to the Philippines Having visited well over 220 countries, and lived in eight, I've come to be something of a gourmet, or at least a gourmand, in sampling the world's political and geographic locales. Seeing Chase Resource's property was the occasion of my third visit to the Philippines, and one where I had a lot of time to spend with locals, as well as get out of Manila, and off Luzon, the main island. Manila has few charms; it's just another gigantic, hot, dirty Third World city. But there are 7,000 islands in the archipelago, and they're a different world. Some are still wild enough to credibly harbor stone-age people, or perhaps a few Japanese soldiers left over from WWII. I didn't go to anyplace that primitive, and there aren't all that many primitive places left. When you fly over the archipelago in a small plane, it becomes apparent that the islands are largely deforested, an almost inevitable consequence of overpopulation. In a country where the average income is just a few hundred dollars a year, a peasant family will extract an old hardwood tree (which may be worth upward of $10,000) from the middle of nowhere, even it is taken them a year to do it. And with about two million new people born here every year that have to find a place to live, you can believe it's tough on the scenery. This is going on all over the Third World, and it's easy to just take it as a given. But, at one cocktail party I met one of minority owners of the Taysan deposit, an American in his 80s who'd been an aide to MacArthur. He described how different the place had been in the old days, only 50 years ago, when there were less than a quarter the number of people there now are. Even Manila was a quaint and mellow place. His words make me think of Michener's Tales of the South Pacific (which may be his best work - and it's short). There's something to be said for a golden era of tropical paradise, before the whole world was awash in tourists. The Philippines' current population of 70 million is likely to double again before it finally levels off, and starts falling. But, although most of the islands are pretty torn up, there are some gems. I spent, for instance, a couple of nights on Borocay, a mellow resort island approachable only by boat. It's long beach has lots of nice restaurants offering excellent $5 dinners. I went on a night dive and a deep dive (incredibly beautiful waters) for $20 each, including all equipment. A one-hour shiatsu massage, delivered by one of country's rather famous class of blind masseurs, was $9. And all these prices were high, by Philippine standards, because we were at a resort. Costa Rica has always been my favorite as a place to retire, or just to go and chill out, but I've got to say the Philippines have edged it out of the number one spot. The culture combines the best of the Orient with the best of Latin America (the place was a Spanish colony for hundreds of years, and most Filipinos have Spanish surnames). Furthermore, most Filipinos speak English, and there's enough of an American patina to make you feel vaguely at home. Despite the fact that Clark AFB and Subic Bay Naval Base were there for years, Filipinos still like Americans. With Marcos gone, the place is turning around; Filipinos are tired of being known as the poor men of Southeast Asia. © 1997 & 1998 Agora
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