Bullish in the Year of the Rabbit | Perspective on 2011 Market Opportunities

Upon my return from my most recent trip to China I was bombarded with negative headlines that the Chinese real estate market is on the verge of collapse. Home sales in Shanghaied down 38%! 2010 housing starts in Beijing at its lowest levels in 15 years! China is saturated with western designers and projects that aren’t selling! All of this news is worrisome especially after what we have gone through here in the States. However I think we need to put things into perspective.

China still boasts the fastest growing economy for the last five years. Bloomberg estimates that the economic growth will be around 10.3% this year vs. 12% last year. Either of these numbers would make any of the other G8 members envious. The government is indeed cracking down on real estate and associated speculators. Higher interest rates, higher deposits upwards of 50% and limitations on second homes are all slowing the break neck pace of the past 8 – 10 years. These measures are indeed slowing growth as well as speculation however our developer partners see this as a slowing not an all out halt to growth.

With close to 1.6 billion people and the emergence of the middle class, the growth in China needs to be put into perspective. It is estimated that the Chinese middle class will grow at a conservative 9.7% annually. This means that by the year 2015 there will be an estimated 309 million people in the middle class and by 2025 364 million. To put this into context, the entire population of the United States is roughly 310 million people. So just their growth of the middle class will outpace the population sometime in the years 2018 – 2020. With these sobering numbers and an annual shortfall of housing of an estimated 6.6 million units, China still holds a world of opportunities.

We as architects and designers provide one of mans most basic necessities, shelter. Some are elegant and some is down right simple and affordable. But no matter what we provide, if there is a demand and market opportunity we can accommodate. In every trip I take to China, I count the number of cranes outside my hotel room. Again I started to loose count after 40 in Beijing and Haikou. There is still an intoxicating energy that permeates the urban fabric throughout China. When we talk to our friends and clients they all come to the same conclusion, growth and potential are there it’s just a matter of putting it all into perspective.