Mass market housing in China remains affordable

Mass market housing in China remains affordable, and is unlikely to face the bubble pressures in the high-end segments and top-tier cities.

Speaking at an investor conference, CapitaLand CEO Liew Mun Leong added that opportunities in the retail property segment across the mainland continue to expand.

The China property market is hot. And fears of an asset bubble on the mainland have sparked government intervention and investor caution over Chinese real estate.

But Mr Liew Mun Leong said that the risk of a bubble is confined to a few segments of the market, like high-end residential and Tier 1 cities.

Mass market housing remains affordable, and is a segment CapitaLand that is interested in.

Mr Liew said; “It has not gone to the extent that it is not affordable. Today, they are going about 30-40 per cent. Which means they use 30 to 40 per cent of their income to pay for the housing mortgage. To us, that is something that is very fair. Even in Singapore, it is just below 40 per cent. So for that housing in China, it is fair. It is not alarming.”

He added that in the first quarter of this year, almost half the home buyers across China were first time owners, while only a fifth were investors.

So, the chances of a bubble growing outside the high-end market or first-tier cities was unlikely.

He also expects retail property to gain ground.

At the moment, some 20 per cent of purchases in China are made through organised trade establishments like shopping malls, compared to the almost two-thirds in Singapore. As a result, the expectation for further growth in the China retail property segment is high.

Mr Liew also sees another emerging trend that is likely to spur growth in China’s property market – namely improving transport links.

He said: “Once travelling time is reduced, urbanisation will increase, the economy will expand, domestic consumption will expand. The connections and mobility between the rural and urban areas will be enhanced, and this has a real economic impact, just like what happened in the US a hundred years ago.”

According to government statistics, China aims to improve travel between locations to 9 per cent of existing times by 2014.

Source: Channel News Asia, 5 Jun 2010