Speaking at a forum in Xi'an on October 29, Huang Yu, executive
vice president of China Index Research Institute, said that with
the recent macroeconomic adjustments and controls made by the
government, the annual growth rate of the country's real estate
industry will be no less than 10 percent over the next 15
years.
Huang said this at a forum focusing on the future of the Chinese
economy held in Xi'an in Shaanxi Province.
According to her, China's real estate industry will pass through
three stages of development before 2020: the first phase
(1993-2000) saw the industry growing at an annual rate of 13
percent; the second phase (2000-2010) is experencing an
annual growth rate of 14 percent; and the third phase (2010-2020)
should see an annual growth rate of about 10 percent.
Huang made her presentation in the light of the central
government's 11th Five-Year Plan (2006-2010), and based her
forecast on the following six aspects:
Land and labor
The average price of residential land in major cities in 2004
was 1,166 yuan per square meter, an increase of 8.94 percent as
compared to 2003, 6.08 percent higher than that of land for
multi-purpose use, and 6.67 percent higher than that of land for
commercial use. It is estimated that the price of residential land
will continue to rise until 2010. At the same time, labor prices
will also go up because of an increasing labor shortage and aging
population. By virtue of government controls, these cost increases
will have to be borne by real estate developers.
Real estate demand
It is estimated that by 2010, the average land area allocated
for residential construction will reach 28 square meters per
capita, and total residential demand will be as high as 535 million
to 927 million square meters, which equates to an enormous
development potential for the industry.
Industry newcomers
Newcomers to the industry have increased in number. In 1991,
there were only 4,200 real estate developers in the market, but by
2004 there were more than 30,000. However, not all of them have a
large piece of the real estate pie. Compared with the United
States, where market share of the top 10 real estate developers was
as high as 27.25 percent in 2004, China's top 10 developers only
had two to three percent market share. It is expected that during
the 11th Five-Year Plan period (2006-2010), the market of China's
real estate industry will be shared among a few developers.
At present, foreign capital accounts for 12 percent to 15
percent of all investment in the Chinese real estate industry.
Right through to 2010, foreign investment in real estate will
continue to increase, dividing market share among foreign
investors, state-owned enterprises and established domestic
developers, leaving less room for medium-sized and small
non-governmental interests.
Price
In general, real estate prices in China will continue to grow
from now until 2010. Prices in so-called second-class cities such
as Xi'an and Wuhan are also expected to rise sharply.
Real estate products
The traditional construction model will be replaced by a
sustainable construction model, and buyers will be paying more
attention to mental and aesthetic satisfaction, in addition to
physical satisfaction and safety.
Hot real estate areas
Prime real estate areas will be extended from the Yangtze River
Delta and Pearl River Delta to the central inland and western
cities. Currently, the eight cities most attractive to real estate
developers are Shanghai, Beijing, Guangzhou, Chongqing, Shenzhen,
Nanjing, Tianjin and Hangzhou.
Huang also highlighted four problems, which surfaced during the
10th Five-year Plan period (2001-2005), that still have to be
overcome: limited funds and higher risks for banks; the rapid rise
in housing prices and market risks; an ever-decreasing supply of
land in urban areas and the corresponding increase in the cost of
land; and high energy consumption rates due to extensive
development.
(China.org.cn by Xu Lin November 4, 2005)