Last week’s announcement by scientists at CERN in Geneva of the discovery of the Higgs boson focused almost entirely on the importance of this scientific event for advancing particle physics. However, what was lost in all of the excitement was just how monumental an achievement this is for furthering our understanding of the Chinese real estate market. Now, finally, we have definitive proof of the elusive particle which explains the extremely low yields seen in the market.
The existence of the Higgs boson has long been speculated about by physicists as the sub-atomic particle which would explain the mass and gravitational forces predicted by String Theory’s Standard Model. For years though, real estate analysts have puzzled over the weak nuclear force binding capital values and rental income on commercial properties in China, believing that only the mysterious Higgs boson could explain the short-comings of both the Standard Model and Einstein’s General Theory of Real Estate Relativity. The discovery of Higgs and its extraordinary mass provides proof that it is gravity that has been dragging down yields and not hubris.
Commenting on this unexpected and exciting news, Theo Novak, Investments and Capital Markets at Jones Lang LaSalle in Shanghai said “We have been working with investment committees trying to understand the market, but the Norwegians have been so sceptical for so long that we really thought they would never buy additional assets. The implications of the discovery of the Higgs boson cannot be understated. I think we will now see whole new groups of investors coming into the market, including the Japanese and Koreans.”
While analysts are still hard at work retooling their discounted cashflow models to account for this new information, one thing seems clear – the market will only be going higher. “We see this as a strong positive for the market” Michael Klibaner, Head of China Research at JLL was seen saying on CNBC last Friday. “This will really help first time home buyers enter the market in greater numbers,” he continued.
In the wake of the Global Financial Crisis, Wall Street derivatives desks have been hiring fewer and fewer engineers and math and physics majors. Physics majors at MIT and CalTech were understandably excited about the Higgs discovery. “This opens up a whole new career opportunity for us in commercial real estate in China. I’m going to start studying Mandarin after lunch,” one student was reported to have said.
About the author
Michael Klibaner is the Head of Research for Jones Lang LaSalle in China, based in Shanghai.