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Yao Yang: Real Estate Has Roomy Growth Potential

Jun 17-2021   



The top leadership has reiterated the bedrock message for real estate: houses are for living in and not for speculation. Does it signify an end to the industry’s boom-boom era? In a recent roundtable of Barron’s, Prof. Yao Yang, Dean of the NSD, says that the policy is absolutely correct, yet the industry remains a major pillar of the Chinese economy and still has room for growth.

 

Emerging out of the grips of the pandemic, the real estate industry has posted strong growth in sales, prices as well as investment. People still have an immense demand for housing, and the current average per capita living space, at 30 square meters, glosses over demographic and regional disparities, says Prof. Yao. Migrants to cities are in need of new apartments while leaving their village houses vacant. Over the last decade, China’s northeastern regions have had net population outflow but Guangdong and Zhejiang provinces has added over 20 million and 10 million residents respectively. Rather than resorting to one-size-for-all policies, the government should craft region-specific ones, advises Prof. Yao.

 

The real estate industry will continue to benefit from urbanization. Estimates provided by the NSD to the central government show that 200 million migrants will settle down in cities by 2035, or 10-13 million annually. They will move in tiered tides - from lower-level counties and cities to more developed ones. Chengdu City, in southwestern Sichuan Province, has been welcoming in 500,000 university graduates a year and has seen its population surging above 20 million and on way to surpass Beijing’s. Where people and economic activities concentrate, the housing prices are to rise further, predicts Prof. Yao.

 

Besides setting a price ceiling, the government should work out a long-term mechanism to better contain price increase and send buyers the right message. The best way to do so, says Prof. Yao, is to ramp up costs relating to housing ownership such as progressive real estate taxes.

 

China’s huge market offers enough space for a number of behemoth real estate enterprises. Despite the many companies going under recently, large enterprises have a lower rate of bankruptcy, says Prof. Yao. 

Yao Yang: Real Estate Has Roomy Growth Potential

Jun 17-2021   



The top leadership has reiterated the bedrock message for real estate: houses are for living in and not for speculation. Does it signify an end to the industry’s boom-boom era? In a recent roundtable of Barron’s, Prof. Yao Yang, Dean of the NSD, says that the policy is absolutely correct, yet the industry remains a major pillar of the Chinese economy and still has room for growth.

 

Emerging out of the grips of the pandemic, the real estate industry has posted strong growth in sales, prices as well as investment. People still have an immense demand for housing, and the current average per capita living space, at 30 square meters, glosses over demographic and regional disparities, says Prof. Yao. Migrants to cities are in need of new apartments while leaving their village houses vacant. Over the last decade, China’s northeastern regions have had net population outflow but Guangdong and Zhejiang provinces has added over 20 million and 10 million residents respectively. Rather than resorting to one-size-for-all policies, the government should craft region-specific ones, advises Prof. Yao.

 

The real estate industry will continue to benefit from urbanization. Estimates provided by the NSD to the central government show that 200 million migrants will settle down in cities by 2035, or 10-13 million annually. They will move in tiered tides - from lower-level counties and cities to more developed ones. Chengdu City, in southwestern Sichuan Province, has been welcoming in 500,000 university graduates a year and has seen its population surging above 20 million and on way to surpass Beijing’s. Where people and economic activities concentrate, the housing prices are to rise further, predicts Prof. Yao.

 

Besides setting a price ceiling, the government should work out a long-term mechanism to better contain price increase and send buyers the right message. The best way to do so, says Prof. Yao, is to ramp up costs relating to housing ownership such as progressive real estate taxes.

 

China’s huge market offers enough space for a number of behemoth real estate enterprises. Despite the many companies going under recently, large enterprises have a lower rate of bankruptcy, says Prof. Yao.