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The Real Estate Industry in China
The real estate industry of China has been an important pillar of the Chinese economy over the last decade. Demand for new Multicenter has been very strong in cities with rising incomes, which has led many people to improve their housing. This is associated with massive urbanization that occurred in China during the past two decades creating a constantly growing need for housing. These two factors combined with the fact that the Chinese have seen the real estate market as the best place to park their savings over the past decade, especially in the high range estate, helps to drive the growth of China’s real estate market.
Real Estate Market Under Stress
The transition from a State-controlled in the 1980s to a market-based economy has put China on a path of high growth. The real boom came in the 1990s when the housing sector was privatized. It is at this point that the real estate market took off, resuming the work unit system in which the apartments were awarded as the benefits associated with the employment of a person. The magnitude of this change is the key to the analysis of China’s economic growth. The study showed the real estate sector in China accounted for about 5% of GDP in 2000 and has increased by 15% in 2012.
The Chinese Government has also tried to help with recovery plans housing sector has overcome the global economic crisis. The Real estate has been the most important engine for growth in China and if its prices continue to decline, investors are likely to cash out their losses and buyers are likely to hold off on purchases. This, therefore, reduce demand and allow a high intake of houses that would sell only at lowered prices. Many analysts and economists say that the market of the real estate in China is for a major correction, but it is difficult to predict if there will be a housing crisis or just a slow price stabilization.
The average income for Chinese living in urban areas is 26 955 RMB (4 390 USD) per year, where the price of per square meter to buy apartments in cities like Beijing or Shanghai can hover around 54 000 RMB (8,800 USD) to 29 000 RMB (4 720 USD). Price to earnings ratios is as high as 32 in the main cities like Beijing and Shanghai, compared with cities such as Singapore, New York or Toronto.
Housing Boom in the Real Estate Industry in China
In 2001, the Chinese Government has set up a large number of policies to strengthen the real estate sector so that it can function as a backbone of the economy Chinese. In 2001, the investment in real estate was estimated near 624.5 billion RMB or 17% of the total capital investment. This amount increased to 71.8 billion RMB or nearly 25.3% from 2012. The market of the real estate in China was opened and has suffered an outbreak of prices due to the huge demand coupled with the rupture of the economy growth and the increase in the salaries in China.
To stop the overheated property market, the Government has drawn up a set of policies, to limit the number of homes that can buy an individual, causing, discounts on interest rates and imposing property taxes on luxury homes in some cities. Policies have worked to a certain extent, but it still has an inelastic demand, due to the rapid urbanization and some cultural traditions that emphasize the importance of owning his own house or apartment after a wedding. This will situation will help the industry to keep thriving in a long term basis.
China has built apartments for more than 36 million people in low income until 2015. These cheap apartments will be rented or purchased well below the market prices. However, the financing of the construction and the transparency of the assessment of candidates have faced concerns and generalized questions.
In 2012, the investment in the real estate market has increased by 16.2% to 7.18 billion RMB, where investments in residential properties have capitalized 11.4% of the total investment. China’s real estate market is booming, after many government measures to support this sector, in fact, there has been a dramatic increase in transactions and prices. Cities such as Shenzhen, Guangzhou and Shanghai have experienced significant price increases.
For example, in Shanghai, the index of prices of homes for sale increased 8.31% in the year to October 2015, as opposed to a decrease of 0.17% in 2014, according to figures from Daxue Consulting. The sale of apartment price increased by 19.4% or 31, 424 RMB (US$ 4 865) per square meter.
- In the Shanghai high-end market, the price of an average residential property amounted to 59,534 RMB (US$ 9 216) per square meter in 2015, and by 8.1% in the previous year. The average selling price of the low to mid-range properties increased by 10.2% or 22, 569 RMB (US$ 3 494) per square meter.
- In Beijing, the price of existing houses increased by 4.9% in 2015 from November to an average of 43,349 RMB (US$ 6 711) per square meter.
- In Guangzhou, the average sales price of new houses increased by 10.5% or 18,082 CNY (US$ 2 799) per square meter in 2015.
- In Shenzhen, the average sales price of new houses increased by 23% or 35,628 RMB (US$ 5 515) per square meter in 2015.
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