Investors appear to be betting on a growing Chinese market. Over the next few years, a large percentage of real estate investors are expected to increase their exposure to real estate with a strong focus on Chinese properties. Following a global slow down, investors are expected to place more confidence in real estate as a preferred asset class. China is such a focus because of the market predictions that have been made concerning the emerging market.
China has been experiencing souring property prices and rampant foreign investment for some time now forcing the Chinese government to intervene. The government has begun to restrict property developer access to capital and foreign investment. Bank loans have also gone through reformation in recent months, making it harder to obtain financing. This is forcing a slowdown in the market as developers look for other avenues of financing. Some developers have even begun to pre-sell units to fund acquisitions. China's mortgage loan law changes have made the home buying process more difficult, thus reducing demand. Some developers have had to drastically reduce prices, while others are looking at better marketing as a way of attracting buyers.
Short term investors have been frightened away by the recent slow down, but long term investors believe this is just a phase as the Chinese real estate market makes the transition from an emerging market to a mature one. Long term investors are betting that the changing demographics in China will drive the market in the coming months. While the population won't drastically change, the Chinese economy is getting stronger, and people as a whole in the nation are getting richer, fueling the demand for better housing. It will also create a need for more retail and office space. Over the next 20 years, the middle class will become the most dominant demographic in China, and that could be great news for investors.
