Archive | Overseas

Flow of 400 million people to cities forecast to expand Chinese residential

Published 27 August 2007Australian property industry forecaster BIS Shrapnel forecasts an average of 870 million m²/year of new residential building will be built in China between 2007-11, an almost 80% increase on the 490 million m²/year average over the 5 years to 2006. Office construction will continue to grow, but not at the same pace as residential. The BIS Shrapnel series author & senior project manager, Adeline Wong, said today the forecast for office construction will rise from 15 million m²/year over the past 5 years to 16-17 million m²/year over the next 5.

BIS Shrapnel’s annual study of construction activity in Asia indicates China, Vietnam & Singapore will show the biggest growth in activity in the upturn stage of the building investment cycle, due to rising activity in the residential sector.  Ms Wong said: “Increasing transparency in China’s property market and higher property investment returns are attracting more foreign institutional & private equity funds to the Chinese property markets. Market optimism has spilled over to the next tier of Chinese cities, which has driven robust building activity in these regions.  “We expect a greater proportion of foreign direct investment will continue to flow into China in the next few years, as a result of the market liberalisation reforms following the country’s WTO membership, despite competition from an emerging India.”  She said increased foreign investment had subsequently driven strong demand for office space. BIS Shrapnel expected tight vacancy rates for higher-grade office buildings in main Chinese cities, strong demand for space from the financial & services sectors and that rising rentals would justify the construction of more premium office space, especially in Shanghai, where the 2010 World Expo will boost the economy.   Closer economic integration of the Pearl River Delta & Hong Kong will drive activity in the 2 southern cities of Guangzhou & Shenzhen, but Ms Wong believes local demand for housing will remain the pillar of growth for the building sector in China: “China is undergoing rapid urbanisation, with an influx of people from rural areas to cities each year driving demand for new housing. It’s estimated 400 million people will move to Chinese cities in the next 10 years.”

She said activity in China’s retail building sector was largely being driven by the aggressive expansion of international retailers, such as hypermarkets, which are taking advantage of the newly liberalised market. Urbanisation is also driving the construction of regional shopping centres, and Ms Wong expects rising household incomes and a growing affluent middle-income group will further boost retail trade. BIS Shrapnel estimates retail building activity will rise nearly 30%, from an average 70 million m²/year over the past 5 years to an average 90 million m²/year over the next 5.

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Attribution: Company release, story written by Bob Dey for this website.

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