Is investing in the Chinese property market the way to go

Published:  28 Oct at 6 PM
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China’s increasing popularity for an overseas career move gives rise to the question of investing in its property market for expats fortunate enough to have secured long-term employment

Rumours that real estate in China is heading for a US-style meltdown are giving would-be expat property investors cause for concern but, as with almost everything in the massive country, there’s more to the real estate market than meets the eye. The much-publicised ‘ghost cities’ aren’t the entire supply and demand story here.

Although China’s economy is slowing overall and its policymakers accept the need to stabilise soaring real estate prices, it’s the country’s demographics which give the clue to relative stability in its property market. The diversity and size of the sector as well as its spread across huge distances includes pockets of distress, but decry an actual property price crash.

In China, demand for homes isn’t speculative as it is in the West, as it's based on robust end-user purchases rather than short-term profits. The government-led curb on prices in, for example, Shanghai and Beijing, was aimed at stabilisation rather than the avoidance of a bubble.

China’s four Tier One mega-cities are expected to show housing demand of at least 10 million units over the next decade due to the huge number of rural dwellers projected to move to the cities to work. The country’s leaders have set their goal of a 60 per cent urbanisation rate over the next five years, and at least 62 per cent of present home owners live in pre-21st century homes with shared kitchens and bathrooms.

Over the next two decades, the majority of residents are expected to upgrade to affordable new properties, and the lack of excessive household debt and the recently relaxed equity rulings are positives for the market. China’s largest property development companies are considered to be safe from failure as real estate and its related companies account for around 40 per cent of the country’s GDP.
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