youguo liang - china real estate market

7/28/2019 Youguo Liang - China Real Estate Market

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China and its Real Estate Market:

Transition from High Economic Growth

to High Consumer Class Expansion

Youguo Liang, PhD, CFA

March 2013


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THE CHINESE CONSUMER CLASS

Second largest economy with high growth potential

China is still a poor country with low per capita GDP

The consumer class, however, is much wealthier

Consumer class expansion will drive demand growth for commercial real estate

Size of the commercial real estate market is directly linked to consumer class GDP

As China becomes more developed, commercial real estate will represent a larger shareof its economic output

China will be the top growth contributor to global higher-grade real estate


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SECOND LARGEST ECONOMYWITH HIGH GROWTH POTENTIAL

Source: Economist Intelligence Unit, Feb 2013

2012 GDP (USD Billion) 2022 GDP (USD Billion) CAGR

UNITED STATES 15,724 24,585 4.6%

CHINA 8,231 23,982 11.3%

JAPAN 5,887 5,921 0.1%

GERMANY 3,401 4,193 2.1%

FRANCE 2,627 3,518 3.0%

UNITED KINGDOM 2,458 3,269 2.9%

BRAZIL 2,260 3,990 5.8%

RUSSIA 2,016 4,201 7.6%

INDIA 1,881 6,002 12.3%

MEXICO 1,194 2,355 7.0%

SOUTH KOREA 1,125 2,246 7.2%

INDONESIA 872 2,444 10.9%

TURKEY 790 1,661 7.7%


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BUT STILL A POOR COUNTRYWITH LOW PER CAPITA ECONOMIC OUTPUT

GDP PER CAPITA IN 2012 AND 2022 (000 USD)

0

20

40

60

80

2012 2022

CHINA SOUTH KOREA UNITED STATES


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THE CONSUMER CLASS, HOWEVER, IS MUCH WEALTHIER

CURRENT GDP PER CAPITA OF THE CONSUMER CLASS (000 USD)

0

10

20

30

40

50

India China Mexico South Korea Russia Brazil U.S.


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CONSUMER CLASS EXPANSION WILL DRIVE DEMAND GROWTHFOR COMMERCIAL REAL ESTATE

CONSUMER CLASS POPULATION IN CHINA (MILLIONS)

0

150

300

450

600

750

2012 2022 2032

CAGR: 9.6%

CAGR: 5.6%


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SIZE OF THE COMMERCIAL REAL ESTATE MARKET IS DIRECTLYLINKED TO CONSUMER CLASS GDP

TOTAL AND CONSUMER CLASS GDP OF CHINA (USD TRILLION)

0

10

20

30

2012 2022

CHINA CONSUMER CLASS GDP CHINA TOTAL GDP US GDP


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AS CHINA BECOMES MORE DEVELOPED, COMMERCIAL REAL ESTATEWILL REPRESENT A LARGER SHARE OF ITS ECONOMIC OUTPUT

CHINA REAL ESTATE MARKET SIZE (USD TRILLION) AND SHARE OF GDP (%)

0

2

4

6

8

10

12

2012 2022

CHINA REAL ESTATE ($ TRILLION)

0%

5%

10%

15%

20%

25%

30%

35%

40%

2012 2022

REAL ESTATE AS SHARE OF GDP


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CHINA WILL BE THE TOP GROWTH CONTRIBUTOR TOGLOBAL HIGHER-GRADE REAL ESTATE

CONTRIBUTION TO GLOBAL REAL ESTATE GROWTH (2012-2022)

18.6%

0.2%

0.5%

0.6%

0.6%1.0%

1.1%

1.1%

1.1%

1.4%

1.5%

1.6%

1.9%

2.0%

2.2%2.6%

4.5%

4.9%

5.5%

14.2%

33.0%

0% 5% 10% 15% 20% 25% 30% 35%

Others

Switzerland

Sweden

Netherlands

Spain

Australia

Japan

Italy

Mexico

Singapore

Turkey

France

Canada

S. Korea

Germany

U.K.

Russia

Brazil

India

U.S.

China


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o China is becoming the number one contributor to global growth of institutional-quality

real estate due to strong economic growth, massive urbanization, rising consumer

class and global economic integration

o True demand driver for high-quality real estate of all types is the size, growth andpurchasing power of the consumer class, which is expanding much faster than the

slow rate of population growth in China

o High demand growth, low carry costs and relatively limited alternative investment

opportunities will ensure a high imbedded cyclicality in the growth and expansion of

Chinas real estate market

FROM HIGH ECONOMIC GROWTH TO CONSUMER CLASS EXPANSION


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youguo liang - china real estate market

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