RealEstate-analternativeinvestmRealEstate-analternativeinvestmentAsia'sallenduringpreoccupationwithrealestateisundergoingarealitycheckasaconse-quenceoftheeconomiccrisis.Privateresiden-tialpropertypricesinSingapore，havecollapsedbyover45%fromitspeakinforexample，1996.Theshockanddismayofdie-hardrealestatebelieversisnotsurprising.Formany，however，therationalethatunderpinnedthatrealestateinvestmentisshowingsurprisingflaws.Argumentssuchas"landisfinite"persuadeinboomyears，butarenowdenouncedbysomeasintellectualgarbage.Thelong-termprospectsofrealestateinvestment，whilenotentirelymis-placed，aresubjecttoinvestmentcycles，interestratesandchangesingovernmentpolicies，likeallotherformsofinvestments.Puttingallofone'sinvestmenteggsinthepropertybasket，asmanyAsianshavebeeninclinedtodoinrecentyears，isunlikelytohatchabalancedinvest-mentstrategy.Thisarticleexaminesthepossi-bilities.Realestateinvestmentsareverylongterminnatureandpossesstwoimportantcharacte-risticsthatareoftenlessthanunderstood:leverageandilliquidity.Thesefactorsaccen-tuatethecapitalgainsonrealestateinboomtimesandmagnifythelossonthedownturn.Ifoneweretoinvest$200，000(borrowing$500，000)topurchasea$700，000propertyforexample，asimple10%riseinpropertypriceayearwouldtranslateintoabouta21%returnontheoriginalinvestment，netofinterestexpenseassumedat5.5%p.a..Withthatsameinterestassumption，a10%fallinpropertypricehow-everwouldtranslateintoalossofabout48%onthatsame$200，000investment，thetragiccon-sequenceofleverageworkinginreverse.Theilliquidityofrealestateisanotherimportantfactorforconsideration.Exitingarealestatein-vestmentoftenrequirestimeandpatience，par-ticularlysoinalessfavourableenvironment.Theaverageinvestorneedstoconsiderthesheeramountofthefinancialinvestmentandtheuni-quenessofeachpropertyasset.Theilliquiditylimitstheflexibilityinvestorshavewhentheyneedtorealigntheirinvestmentsinaccordancewithchangingmarketconditionsorchangesininvestmentneeds.Thelong-termnatureofrealestatein-vestingrequiresittobematchedwithstable，long-termcashflows