146: Chinese property boom - trends and demographic fundamentals
07-15-2007
Demographic Trends and how they affect Property Investment Potential
Demographics: 'the quantity and characteristics of the people who live in a particular area, especially in relation to their age, how much money they have and what they spend it on'
Baby boomer: 'somebody born during a baby boom, especially the one following the end of World War II.'
In this section:
- see how studying Chinese demographic trends indicates that the
- see how Asian demographic trends indicate that you should exercise more caution with properties in countries with lower population growth and unstable economies
- see which property types and geographical areas to favour and avoid, based on property demand predictions up to 2050
- see how the aspirations of retiring baby boomers are likely to drive up demand in specific areas and with specific property types.
The Chinese population is projected to increase from some 573 million in 1950 to 1310 million in 2002 to 1480 million in 2025, mainly through people living longer. Much of this population growth is from people living in the interior agricultural areas migrating to city and coastal areas for work – examples are
The restrictions on the size of families has dented the population growth. But even though China is not 
reproducing itself, people are living far longer than previously mainly due to improved health care, food and working conditions – albeit counter to this trend is that fact that most people get less exercise and are more overweight than 50 years ago. If this trend is reversed, one could expect to see average ages and hence the population grow even higher.
Another important trend is immigration – the mass influx of agricultural people to city areas in such of manufacturing jobs is leading to a boom in population in city areas – this is also supporting GDP growth and preventing wage inflationary pressures building (which can in turn lead to higher interest rates). This general demographic situation is well known, fairly deterministic and should help support house prices and demand for property in the longer term. On a small scale, expect the following demographic trends on a regional level:
- As baby boomers retire, they will move out of city suburbs to be close to the sea or in leisure areas such as national parks, though most will try and stay close to their families and friends
- Continued strong economic activity in the major service centres will lead to increasing populations and wealth e.g.
- Many rural areas that are not considered good retirement centres may continue to depopulate as farming becomes more difficult and water shortages occur (e.g. NW China) – though the people that move in may be wealthy ex-city workers wanting a lifestyle change.
- Many retiring baby-boomers will relocate to southern coastal areas in
- City centre living and pied-de-terres will become more popular as amenities (e.g. healthcare) and cultural activities improve for both young and elderly people – many commuters will become tired of long daily commutes and have two properties – one in the country, one in the city.
So there will be a shift of low earning rural people to the cities/suburbs and wealthy city folk to the countryside close to large cities. There will be a considerable increase in demand for homes (whether permanent or second homes) with sea/coastal views as the baby boomers retire starting (the oldest baby boomer is now 62 years old) and continuing for the next 20 years.
The Chinese has a healthy demographic trend for house prices – however, the population of
Country 2010 2025 2050 % increase ’02-‘50
Million million million
Philippines 96 119 148 78
Japan 127 120 100 -21
Total 3702 4189 4585 34
However, both Japan and Russia will see population drop significantly after 2010 so be wary of investing in these countries – particularly in depopulating agricultural areas a long way from the main cities (e.g. Siberia in Russia and northern Japan).
Asian Demographic Changes up to 2050
Property investment is for most people a long-term financial undertaking – so with this in mind, it seems 
prudent to consider future long-term demographic changes that will affect supply and demand for property in
In
The Japanese and Russians will have an aging population that will start affecting GDP growth after 2010, as more retired people are kept by fewer worker.
Some South Asian countries such as
Predictions for Chinese Property demand up to 2050
Based on these projections of an aging population, we have prepared a few types of property that will be in demand, and those that will not be in demand as this demographic shift takes place from now until 2050:
- Secure luxury apartments in nice neighbourhoods close to city centres in (mainly in large cities like
- Medium sized holiday homes on the south coast of
- Luxury apartments, villas and holiday homes in tourist areas on the southern coast of
- Rural retreats close to
- Quality medium sized home in the in secure areas towns and historic university towns– the further south the more popular
- Commercial office and retail premises in good city centre locations close to roads, rail and central business districts
Property Not in Demand- Large houses agricultural areas far from industry and the coast (NW China)
- Village and rural homes in western
- “Run of the mill” family homes with many bedrooms in areas not close to good amenities, health care, city centre culture and tourist attractions
In Chinese cities where wages and the standard of living will rise the fastest, one can expect to see prices moving up fast. Since Chinese like to be close to their families, there will likely not be a mass migration of retiring babyboomers to coastal area – however, the more wealthy babyboomers may purchase second homes or holiday homes in pleasant resorts.
“Baby Boomers” Demographics and Desires
A key consideration in future property investments is how will the baby boomers affect market prices and demand, and which segments will this be in? The baby boomers are those born between mid 1946 (end the World War II) and 1964. This was an unprecedented baby boom period in
These baby boomers will starting to retiring around 2010 – the first wave are now 61 years old in 2007 – 
most retire between 60 and 65 years old. In the next twenty years there will be a huge opportunity to service these baby boomers – they are the ones who have benefited most from the boom economic years and have already driven house prices to record highs. They are currently in their peak money generating years (40s and early 50s). So what next? Our prediction is that these baby boomers will want the following:
Sun, sea, sand, south, sailing, golf
These new baby boomers will “not” want to sit out their retirement – most will be active, sporty, fit, desire the café culture, want to travel extensively, and be independent. They will “not” desire boring warden assisted retirement complexes in the middle of nowhere – what they “will” desire is fun, the sea, a community and proximity to family, friends and culture. They will avoid high crime areas, want to be close to airports and avoid traffic jams. They may also desire to return to where they or their family grew-up if they had fond memories, or move to where they enjoyed family holidays. In summary, they are likely to either:
- Stay put if they already live in a nice home
- Have a second home in a holiday resort – probably at the coast (sun, sea, sand, sailing)
- Have a secure apartment in a town or city centre with culture
We believe the ideal investment to service these needs is a medium-high end two double bedroomed apartment with balcony overlooking the sea or marina (example locations would be the south coast of 
China
Any improvement in infra-structure in towns will improve property prices – examples are new Universities, new high speed train links, Olympic venues, large new office complexes.
We see particular capital growth in these areas in the next 10-15 years, as more baby boomers decide to settle outside urban conurbations to the “seaside”. The sea, sand, sun, surfing, sailing, walking, cycling, café culture and activities / amenities will increase demand in these areas. That it not to say that the main city centres will not do well. Baby boomers may also choose to have a pied-de-terre for tourism, leisure, maintaining business and investment contacts, visiting family and friends – hot areas are likely to be
Below for reference are the largest Asian cities with their populations and ranking. The cities that are expanding quickly such as Indian and Chinese cities will do very well from property investment. As it becomes more difficult to travel into work and the cities expand and congestion increases, the central apartment locations will sell at a premium.
Biggest Asian Cities (with Global Ranking by size)
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28.
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81.
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90.
92.
