The Chinese Real Estate Market

China’s enormous population and different residential requirements clearly distinguish it from other countries. Through rapid economic growth and increasing prosperity of the population, high demand exists especially in the housing sector and is due to strong influx into the cities difficult to fulfill.

During the past 20 years the Chinese real estate market has developed into a modern and highly interesting market for investors, promising high returns in real estate development. It was characterized by a continuous upswing over the past years. Sales as well as the average price for new apartments have increased nationwide. In 2009 a total of 644bn USD were invested in Chinese real estate (+80% compared to the prior year) and throughout 2010 investments will increase by approx. 5.7% (Bloomberg) compared to the previous year. Current price comparison studies on the Chinese real estate market (Xinhuanet 15 October 2010) show, that in an annual comparison real estate prices in October increased by approx. 9.1% in China`s 70 largest cities.

At first real estate investments concentrated on the highly developed larger Chinese cities (1^st tier cities), especially Beijing and Shanghai. Whereas in the last few years investors have increasingly concentrated on emerging large Chinese cities (2^nd tier cities) such as Shenyang, Chengdu, Chongqing, Tianjin, Nanjing, Dalian and Qingdao. The demand for specific condominiums in these cities is substantial. In addition to that 2^nd tier cities combine the advantages of an industrialized metropolis with potential returns of a stable but rapid developing real estate market.

China is undergoing a process to a market-oriented economy with macroeconomic control by the central government. Thereby the state has the possibility to secure a stable price development in the real estate sector and protect as well as stabilize the market by means of regulatory procedures. The government will continue to protect the relatively secure and healthy Chinese real estate market from overheating and creating bubbles through speculations. The expectations of the market as a whole are very promising.

The Chinese housing market has not yet been saturated and its buyers offer a reliable financial foundation.