China Real Estate Industry an Overview

Real estate development began in China in 1981, and today China Real Estate is the most important sector in the world. In the past 10 years, the growth of this industry was the Asian giant’s growth model. The growth rate and unique model of construction in China have shaken the whole world’s economy and development.

Due to the fast work construction and the aim of the government to be a superpower, they build large cities in different regions of China, but the China Real Estate slump in 2022 is what pushes the country back; still, this country is the second largest economy in the world.

Like always, this economy will affect the world in major facets as this economy plays a vital role. Some of the major issues which we will be discussing in this article that how this sector slowed down compared to previous years. The slowed-down process and slump of the real estate market in China could affect the global market!

Along with these factors, we will be focusing deeply on the China Real Estate Industry.

China Real Estate Sector

The revolutionary period of this sector has been started about 42 years ago in 1981. The government of China contributed a lot to support this sector. Initially, the government announced the permanent residence and employment of all the employees involved in the real estate industry in China.

That was the step of government that helped the industry to enter its golden period. From the beginning when it started to 2008, the industry reached the top of the country’s other sectors. According to a survey, when this industry was booming from 2008 to 2012, was because 60 percent of the population was living in urban areas, whereas 40 percent was living in Rural areas.

The high demand customers for homes in this country lead the China Real Estate Industry to grow more rapidly; in fact, this industry has grown faster than the whole of Europe and the US Real Estate. But due to some factors of economic growth, the government of China announced slowing down the Real Estate Growth in 2015.

China Real Estate Contribution to GDP

According to the IMF (International Monitoring Fund) Economist Yuanchen Yan and Harvard Professor of Public Policy Economics Kenneth Rogoff, the contribution of the real estate industry to China’s GDP is 29 %. They both have predicted the real estate future of this country; according to them and another researcher, this sector is going to go down which is due to slow construction and some other factors.

It is predicted that this industry will contribute only 11 % of the total GDP in the coming years, at 2030, the contribution will be closer to 7 %.

However, let us answer the most important question of the world “How Big is China’s Real Estate Sector” In 2020, there is a research paper published by the National Bureau of Economic Research. According to that research, this sector is the most important for the wealthy government of China.

That is accounting for about 29 to 32 percent of the country’s GDP. This industry is a billion- and trillion-dollar-worthy sector, which contributes more than 4 trillion dollars every year in GDP. That is why Real Estate is the most important asset of this economy.

How Do the Chines Invest in Real Estate?

Let us share with you that 70% of China’s wealth is kept in the real estate sector, and the people of China consider it their savings. It is that the current real estate crisis is forcing investors to reevaluate their preferred method of saving. But people in different cities experience a kind of living that no European or US Citizen will experience.

The China Real Estate market concept is quite different from other countries; Chines mostly invest in apartments in different residential complexes. Their investment made them happy living in apartments with beautiful surroundings and modern markets, and seaside retreats.

The developers of a skyscraper offer their residents the lifestyle that they want, like if someone wants to have surroundings and living standards like Europe, the exact culture, surroundings, and building structures will provide to them.

China Real Estate Impacts on its Economy

In the first quarter of this year, the government of China noticed an increase in real estate prices. The reason for that high price is the strong demand of consumers and people’s attention to live in their own luxurious apartments in China. Some of the developers have failed their investors by developing residential buildings in different cities in China.

This breakdown and slump of the China real estate market are because of the poor strategy of developers. Many developers do not put their own money into projects. In such a case, the residents would have to pay high taxes on behalf of their investment and living in high-class apartments.

The taxes imposed by the government regulation cause big trouble in the real estate industry in China. Residents already invest all of their savings in their homes and are unable to pay their taxes. This harsh situation in the country’s real estate sector attracted the attention of the business world, media, and scholars.

This will also affect the Chines economy negatively. To face and fix the current breakdown, the government of China wants the people of its country to follow the Economic Institute published paper rules and laws. The institute named the research paper China’s Real Estate Cycle and Financial Stability, which will assist the government in stabilizing its financial position and recovering China’s real estate industry loss.

China Real Estate Effects on Global Market

We all have a question in mind Just How Big is China’s Impact on the World Economy? It is not only the sentence that we can look at that China is the second largest economy in the world. This largest economy in the world has affected different countries in the world directly as this country has destroyed American manufacturing.

Similarly, the China Real Estate Industry and other developments affect the world. In the last decade, thousands of different manufacturing companies from different countries in Asia and Europe have moved to China, which is not only because of the cheap labor but the significant strategy implemented by the Real Estate sector of China.

This country’s real estate sector has built unique cities which have no match in the world compared to its construction and building structures. This is considered the major step for China to attract the business world, entrepreneurs, and other multinational companies.

Today, multinational companies are operating from China and cover business activities from this country. As a result, the economy of China is becoming stronger; they no longer need anyone in the world to support them with new Innovations and ideas.

Investors are today interested in investing in this country as China extends their trade and business activities by investing trillion dollars in a project in Pakistan, “China Pakistan Economic Corridor”. This project will help China to trade more efficiently and easily through the Arabian Sea and Indian Sea with the World.

These three dynamic factors, the development project in the China Real Estate Industry, a complex and large road network inside the country, and the CPEC project to be closer to the world, will make the China economy stronger.

China Real Estate Current Position, Growth, and Government Policies

The government of China strictly directed the developers of the Real Estate Market to follow the financial rules of property development. This results in the breakdown and downsizing of the development growth in real estate, which was noticed by the government in the last quarter of 2021. After finalizing the report, the government had only 7 percent of growth at the end of 2021.

Similarly, the growth is expected to be only 4 percent in 2022, which is predicted by the Economic research institute. But here is a problem raised, there are developers involved in the construction and development of the China Real Estate industry that is not following the financial rules issued by the government.

This caused big trouble recently in the property market in China, among the government, developers, and those citizens of China who have invested their amount in buying property.

As this industry is the most important factor in the Chinese economy, and it is the pivotal driver of the growth of the economy. The government has taken into account to recover the loss of investors and directed banks to impose government laws on developers.

A Gradual Recovery in 2022

There are a lot of different controversies and uncertainties about the China Real Estate Industry, but the truth is nobody can stop China from its bright future and spot. The initiatives taken by the government will be applied in the overall sector in the third quarter of 2022. In the last Quarter of 2022, it is expected to recover all the losses and will have an increased growth rate.

For the third-child policy in China and the real estate industry, there will be friendly adjustments in policies. As per the government monetary policy, commercial banks have started the implementation of policies like offering home loans on possible requirements.

On a larger scale, the government promotes mergers and acquisitions in the real estate industry, where larger and frequently state-owned developers are likely to take over the less financially stable participants.

It is believed that these real estate development companies use their connections to obtain financing from regional governments. Chinese state-owned companies entered the market in a flurry of deals in the first few weeks of 2022 in an effort to help cash-strapped private developers.

It is advised that foreign investors keep an eye on these regulatory trends in the future if they plan to continue buying the high-yield bonds of China’s well-known real estate developers.

Buying Property in China as a foreigner

Looking to purchase a home in China as a foreigner? If you’ve been residing and working in China for a while, you have probably noticed that the China Real Estate Industry is booming, and houses are at high prices. Why pay rent when you could put your money into buying an apartment or a house?

Are you considering purchasing a commercial property? Let us help you in your buying process.

Before buying property in China, a foreigner must have spent at least a year there either studying or working. In China, a foreigner is limited to owning a single residential property.

By province and city, different requirements apply. For instance, taxes and social security are required to be paid in big cities and the Capital of China, Beijing.

For Foreigners, there are the following restrictions for buying property in China:

The property you buy must be residential
There is a role to follow; you could only buy one property.
You should have had a China Visa for a long time.
For a foreigner, it is not possible to become a landlord.
If you are obtaining a mortgage, you should pay 30% of the initial amount in the total payment along with a 1% deposit to the seller in RMB.:

Steps to Buy Property in China as a foreigner

Following are the steps for buying property in China as a foreigner:

You should have proof that you have a valid China visa.
Search at different platforms online and select the nearest location.
You should make an offer with the seller into a preliminary agreement.
The seller signs the official sale contract.
For the house’s title to be transferred to you in your Chinese name, go to your nearby Deed and Title Transferring Office.

Different cities and regions have various housing markets, just like in the United States of America. A desirable location will cost more per square foot than a remote suburb. As you search for a house for you and your family, keep it in your mind.

When determining the purchase price, you can afford, bear in mind that you will also have to pay up to 11.6% of the purchase price in other fees, including a transfer fee of 0.5%, the city maintenance and construction tax of 7%, legal fees of 0.2% to 0.4%, and notary fees of 0.01% to 0.3%. Deed taxes range from 3% to 5% of the selling price.

Incorporate that into your housing budget as these are the requirements in China Real Estate Industry.

Conclusion

The World’s second-largest economy is not going to fail, and the current challenges of China’s Real Estate Industry are expected to be solved soon as this community fought against Covid-19 better than the other countries in the world. This strong community will face the current challenges dynamically, which will, of course, help this country to become stronger and a Superpower.

Note: The information we have shared with you has been gathered from various sources, including social media, news channels, and research institutions. We forecasted the Chinese economy and Real Estate Industry’s future based on our knowledge and the data we have gathered.