The Current Situation and Future of Real Estate Industry(IV)

Residential real estate is still the mainstream of the market

We believe that among all the business models of the real estate industry, residential real estate development as a core business will remain the mainstream of the future market, and there is still much room for development. Mainly based on the following reasons:

  1. The population continues to grow: The core of real estate is the population. Historically, China’s population has continued to grow, and the natural population growth rate has remained at around 5% in the past 10 years. In 2016, under the influence of the second child policy, the population growth rate increased slightly, reaching 5.86%. At present, the population growth rate is gradually lowering, and the aging process is accelerating. However, with the support of the third baby boom population in the late 1980s and the policy of second child or even no longer limiting the number of fetuses, China’s population dividends still have room for release. The growth rate is expected to be greater than 0 for a long time, and our population will continue to maintain a good growth momentum, creating housing demand for the residential market.

  1. Urbanization is long-unfinished: In 2016, China’s urbanization rate was 57.35%, an increase of 10.36 percentage points from 2008, an average annual growth rate of 1.3 percentage points, and the growth rate slowed down compared with the previous period, but the overall level and high income. There is still a big gap between the countries. The urbanization rates of Germany, the United States, the United Kingdom, and Japan are as high as 75.51%, 81.79%, 82.84%, and 93.93%, respectively. At the same time, at this stage, China’s urban agglomeration pattern has just formed, and the aggregate power of urban agglomerations is gradually emerging. The talent policy also promotes the further inflow of population to urban agglomerations, which will further enhance the future development of urbanization in China. The newly-increased urban resident population brought about by urbanization is a rigid demand for the residential market.
  2. The per capita living area and quality have room to improve: the development of the real estate industry has also brought a happy life to the people. In 2016, China’s per capita living area was 36.6 square meters, a significant increase of 35% compared with 10 years ago. The comfort of housing is significantly improved, but there is still a certain gap compared with the per capita living area of developed countries. Assume that in the future, China’s per capita living area will reach 44 square meters in developed countries, and there is still room for growth of 20%.
  3. The space of residential basic guarantee marketing is huge

In May 2017, the State Council executive meeting decided to implement the shanty towns transformation project from 2018 to 2020, and then transform 15 million sets of shanty towns. In the next three years, it will still bring in 230 million square meters of destocking scale every year. Building a comfortable and reasonable home for the people in the shanty town is a huge market.

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