Looking west at real estate

Until the late 1990s, Chinese households and enterprises occupied state-owned property. Average residents had their housing provided for free, through government welfare departments and the housing offices of state-owned enterprises.

With the advent of privatization came one of the largest real estate booms the world has ever seen.

Shanghai is an obvious beneficiary of this — new skyscrapers, shopping malls, and residential housing complexes are springing up both in the city and in the surrounding suburbs.

But central and western China now offer even more opportunities for real estate investment, and the reforms that have worked in the coastal cities are promulgating through the rest of the country.

According to a report by Beijing-based research firm Zhongjing Zongheng, just released in English last month, the real estate market has grown by 19.5 percent in the Eastern cities. But that pales before the growth in the inner regions — 36.3 percent increase in central China and 32.1 percent in western China.

The research company predicts that the boom will last for another 20 years.

They may have a point, since city residents still account for only 42 percent of China’s population, according to United Nations Population Fund, compared to an an average of 75 percent in the developed world.

That’s a lot of growth potential.

Here at Emerging China we plan to devote a significant amount of time to cover the changing real estate market in China’s central and western cities.

International companies are affected by this growing market in a number of ways. Foreign firms buy and rent property for their offices, and sometimes need residential space for their key employees.

In addition, many foreign investors are getting into the real estate as an investment, to the constraints allowed by law.

Finally, international real estate companies may have an advantage over local competitors when it comes to reliability, service, and their global capabilities. But, again, local regulations may limit the extent to which they’re allowed to do business.

Regulatory changes are as important — if not more so — than market demands, when it comes to the Chinese real estate industry.

When we plan our coverage for the coming months, you can look forward to articles about the ways the laws are changing throughout China, and how foreign investors, renters and property companies are affected by the laws.

Next week, we will be posting an online calendar with a schedule of our special issues — please keep an eye out for it.

Have a great summer!