There have been shockingly large price increases recently for property in mainland China, so there’s heated debate over whether the industry is blowing into a bubble that will inevitably end in a nasty popping sound. If so, can anything prevent that from happening? Or, are fears of a bursting real estate bubble unfounded?
The similarities between the Japanese economy in the 1980s and China’s economy today are striking: In both instances, the large Asian economy was (and is) a large holder of U.S. debt, had substantial trade friction with the United States, exhibited huge loan growth in the banking sector, and fears of domestic property bubbles grew day by day. We all know how this story ended for Japan — i.e., a lost decade of growth! But how will it play out in China?
In September, IREI and APREA teamed up to produce the VIP – Asia Investor Roundtable, a real estate conference for investors and the investment managers serving them. Since this was the first investor-focused event in the history of real estate conferences in Asia, I wanted to give you a quick update on some of the issues discussed there.
Steady improvements in life expectancy combined with declining fertility rates have contributed to the world’s rapidly aging population. This trend has major implications for many countries around the world as their social institutions struggle to cope with the increasing burden placed on them. For emerging economies such as China where the population is aging at a greater rate than most developing countries, this trend is creating enormous challenges for senior care.
China’s growth story in the past decade has impressed the world on many fronts. A decade ago, the real estate markets of the country’s first-tier cities — Shanghai and Beijing — had all the characteristics of “emerging” markets. Today, being the world’s fifth most active real estate investment market, they have risen to be firmly placed in the “transitional” category, leaving other BRIC (Brazil, Russia, India and China) cities behind, and are now on the fast track to advanced maturity.