Construction Industry Analysis

China Real Estate Market Overview

In line with the growth of China’s economy and the accelerated fixed assets investment, real estate investment in China has increased rapidly. In addition, the urbanization process and rising living standard encouraged the need of local residential and commercial property demand. The Chinese government also plays an active role in shaping China’s economic environment.


Despite the macro-control policy changing from 2010 to 2014 with the aim of regulating overheated speculative real property investment, total investment in China’s property market increased from approximately CNY 6,180 billion in 2011 to CNY 10,258 billion in 2016, representing a CAGR of approximately10.7%.


In particular, increased disposable income, along with other factors including change ofpopulation structure and changes in birth control regulations and policies, raised the demand of midtohigh-end residential properties for home upgrade needs. It is believedthat mid- to high-end residentialproperties typically refer to properties targeting purchasers of housing units with a GFA ranging from90 sq.m. to 200 sq.m. to satisfy their initial and subsequent home-upgrade demand.


According to China Index Academy, from 2012 to 2016, the percentage of housing units sold with a GFA of less than90 sq.m. in 30 selected major cities in China experienced a decrease from 28.0% in 2012 to 26.1%in 2016, while the percentage of housing units sold with a GFA ranging from 90 sq.m. to 200 sq.m. increased correspondingly from 51.6% to 56.3% to accommodate the growing home upgrade needsin China’s real estate market. It is expected that the percentage of housing units sold with a GFA ranging from 90 sq.m. to 200 sq.m. will experience continuous growth across China in the future.


In particular, according to China Index Academy, average residential gross floor area per capita in China is expected to increase to 38 sq.m. in 2020, resulting in home upgrade needs of mid- to high-end residential properties increasing by approximately 2.2 billion sq.m., accounted for 26.4% of the aggregate demand for residential properties in 2020.


Recent Developments of Real Estate Policies in China

The real estate market in China is subject to extensive government regulations. The Chinese government exerts considerably direct and indirect influences on the development of China’s propertysector by promulgating laws and regulations and imposing industry policies and other economicmeasures. Over the past few years, in order to avoid over-heating of the real estate market, the Chinese government has promulgated various restrictive measures to stabilize housing prices. Recently, someof these measures have been relaxed.