 Statistics of the Real Estate Industry of China in Recent Years
According to the Chinese Ministry of Construction, China saw a rapid increase in real estate investment between 2001 and 2006, a crucial period in the country's rapid urbanization process.
Statistics show that the national real estate investment in the first 11 months of last year, 2003, reached 1.324 trillion yuan, up on the total of 2004 - 1.316 trillion yuan. In 2004, the added value of the real estate industry reached 717.4 billion yuan, about 4.5 percent of China's national gross domestic product (GDP).
The ministry also revealed that by the end of 2005, the purchase of private housing had accounted for 93.2 percent of the total dealings, with Chinese residents spending 968 billion yuan that year, about twice that of the year 2000. Chinese residents' total expenditure on houses in the past five years has exceeded 4 trillion yuan.
Between 2001 and 2005, nearly 1.3 billion square meters of new housing were built in China each year -- 570 million square meters in urban areas and 730 million square meters in rural areas. At the end of 2005, the per capita living space in China's urban areas had increased to 26 square meters China's real estate industry maintains a rapid growth in 2006. The sales of commercial houses in 1Q 2006 was RMB 319.27 billion, increasing by 13.4% compared to 1Q 2005. The total real estate investment was RMB 279.268 billion in 1Q 2006, increasing by 20.2% compared to 1Q 2005, among which residential property investment shared 67.6%, in which economical applicable house investment shared 2.2%.The year-on-year growth of commercial house investment in the east China, central China and west China were 18.9%, 40.6% and 29.4% respectively.
The Reasons behind the Booming Real Estate Market of China
As the government scrapped the traditional free housing welfare in government departments and state-owned enterprises in the late 1990s, the only way to own a home in Chinese cities is to buy in the market.
China's economy grows very fast, at an average annual growth rate of about 9%. The income level of ordinary citizens has also gone up to a historical level, therefore, many of them can afford a personally owned house – so-called “economic house” or “commercial house”. This provides a solid economic pre-condition for the increasingly booming property market in China.
With the fast growing economy in China, the urbanization of China has also entered into a new stage – more and more people are going to cities for a “better” living and work. And every year, many university graduates who are also seeking a place in cities. For example, the dozens of universities based in Beijing generate more than 150,000 graduates every year, with a majority of them staying in the capital city to work and live. Ministries and commissions of the central government recruit more than 10,000 civil servants from all over the country every year, and the Beijing municipal government recruits several thousand, let alone migrants from other channels.
In face of this fast growing market, both domestic and overseas investors are pouring capital into the real estate industry of China. The intensive investment has made it the most profitable sector of the whole economy.
For instance, the 2006 China Forbes Millionaires List shows that 20 people of the top 50 on the list either place real estate industry as their core business or make a lot of money from it. In another millionaires list, the Huren Millionaires List, 6 of the top 10 rich people are directly involved in real estate business, and for another two persons, real estate is one of their important business sectors.
And according to a report released by international property adviser DTZ Debenham Tie Leung, about 18 billion yuan of foreign capital flowed into the real estate market in Shanghai in 2006 and one million square meters of floor space in commercial buildings were put on transaction. Of the source countries of this foreign capital, United States accounted about 70% of all the foreign real estate investment made in Shanghai in 2005. By 2006, however, more capital came from Europe and the Asian Pacific region, which together accounted for half of the total real estate investment, roughly the same as that of the US.
Problems with the Booming Real Estate Market of China
Some analysts argue that the country's land property market yields fat profits, which are acquired not so much by entrepreneurship and managerial skills as by taking advantage of scarce land resources, exploiting cheap labor and making use of institutional loopholes in the existing real estate market.
Although overseas capital accounts for a rather small portion of total investment in the real estate sector, it plays a disproportionately big role. This is because the price of real estate, which, apart from being one of the basics in people's lives, is regarded as an investment, is largely set by the expectations of the investors, or house buyers. Overseas capital, small in proportion as it is, helps largely drive up the market expectations and, in turn, real estate prices.
Although since 2005, the government of China has adopted a series of macroeconomic control measures combined to curb the rapid rise of housing prices, but it is still growing up to a new level, which is well beyond the economic reach of many ordinary urban residents. Statistics show that in 2006, housing sales prices in 70 large and medium-sized cities nationwide rose 5.5% over the previous year. Meanwhile, the annual investment in real estate development reached 1.9382 trillion yuan, an increase of 21.8%. |
