Prospectsof Real Estate Market- Apartment for the Aged in China
Thesenior population in China has been rising in numbers for the lastten years. This population growth is expected to increase as moreworking people continue to retire. The issue that comes up from thesedemographic changes is that housing for the aged citizens of China isinsufficient to handle those many people. In the past, the oldmembers of the society used to live with their relatives after theyretired. Times are changing, and the younger generations no longerhave such customs. In addition, the younger populations havefinancial constraints, and many cannot afford to care for their agedrelatives. On the other hand, the retirees usually have enoughsavings to enable them to obtain a good place to stay out theirsunset years. The problem is that the real estate in China does nothave enough facilities to cater for so many people. An immediateanswer to the matter needs to be implemented since the seniorpopulation is expected to reach 20% of the entire populace by 2020.
Usingvarious academic sources, this paper will analyze the challenges thatface real estate in China. The market prospects and its potentialwill also be assessed to show if the establishment of seniorapartments is a lucrative venture. The impact of proper housing forthe Chinese retirees such as emotional and physical wellbeing will befully described. Various recommendations for solving the issue suchas change of government regulation will be explained.
Afterthe population of China had begun to increase exponentially, thegovernment at that time introduced the one-child policy. The policystipulated that every couple could only raise a single child. Thisstrategy was aimed at reducing the population explosion, and within afew years, the system worked. However, a new problem has begun. Themajority of the Chinese citizens comprise of middle-aged and elderlypeople (Li, 2014). The country is rapidly aging, and the numbers ofthe younger generations are insufficient to fill the gap. Theincreased number of the senior people creates a problem when it comesto housing. Formerly, once an elderly person was unable to care forthemselves or when they lost their spouse, they usually moved intoone of their children’s home. The same practice is no longer viablein recent times (Li, 2014). The housing structures have changed fromextensive homesteads to high-rise apartments. These housing units arejust enough to cater for a small family of three or four. Anothermatter is that the productive population of China is reaching theretirement age. The labor force of the nation is expected to reduce.The reduced number of the working age group will affect the nationsproductivity, subsequently, its annual revenue. Thus, housingarrangements for the elderly such as nursing homes will become toocostly for the taxpayers to handle (Banister et al., 2012). Thesefactors show that real estate for the elderly in China is anattractive business opportunity.
Thebusiness question is, therefore, the prospects of the real estatemarket in China especially housing for the elderly. The importance offinding a solution to this question is to reduce the potentialhousing crisis that the China is likely to face as its populationcontinues to age. Any investor that is willing to venture into thismarket will find a ready market as government policies continue toattract more development in real estate through use of variousincentives. It is imperative that an early opportunity is taken toundertake a massive project that caters for housing for the seniorcitizens as the outcome will be highly lucrative.
Theinformation used to write this essay was obtained from academicsources. These sources provide the various facts and statistics thatdepict the richness of the senior housing market in the region.Studies have concluded that once a person reaches 65 years of age,very few want to live alone. Considering that they have no guaranteethat they can depend on their relatives for accommodation, the issuecreates a huge demand for programs that facilitate proper housing forsuch people (Banister et al., 2012). The paper will provide an indepth evaluation of the concerns of retirees when it comes to placesof residence and various solutions that will rectify the deficit willbe expounded.
Currently,the number of people that are aged 60 years and older constitute16.1% of the entire population in China. The pie chart belowillustrates how the population is segmented in the country.
Figure1: A pie chart depicting the division of China’s populationaccording to age (Burkitt,2016).
Thenumber of people that have attained the retirement age of over 60years is estimated to continue rising. By 2050, the aged populationwill be around 330 million individuals (Burkitt,2016).The figure is high since by then, China will be the leading nation interms of the numbers of retirees. Taking into account that alreadythere is a deficit in well managed houses that can provideaccommodation for such people, the issue will only become worse inthe coming years.
Theyoungest generation in the country has a very low population. In 20years, this generation will be the one that is working while thegroup that is between 16 years and 59 years would have retired. Theproductivity of the 17.6% would be unable to cater for the hugenumber of senior citizens at that time. The only mechanism that canhelp with the situation is to use the current working class todevelop retirement homes that will relieve housing pressure,especially for the retirees (Burkitt,2016).
AverageProductivity of the Working Class
China’seconomy has been improving ever since the 1980s. The country has ahigh GDP and most workers in urban areas earn sufficient income(Burkitt,2016).The table below shows the productivity of laborers in China between2011 and 2015.
Figure2: Average productivity of a laborer from 2011 to 2015 (Burkitt,2016).
Theamount of output that each worker achieves has been steadilyincreasing. This realization shows that the citizens of China caneasily fund programs and projects that focus on establishing properhouses that will serve the retired population (Burkitt,2016).If the current working generation implements comprehensive strategiesthat would assure they spend their retirement age in comfort andsecurity, the housing problem would soon be resolved. The graph showsthat the real estate market of China has people that can invest bypurchasing homes. Once the supply can match the current and futuredemand, the care for the aged will be an easy task.
Inthe past, the Chinese families used to live in clustered households.Often, the first child of the family remained with the parents evenafter they got married. This arrangement used to guarantee that oncea person gets older, they can be taken care of by one of theirchildren. Changing times have brought about different perceptions andnorms. Many families in China now prefer smaller housing units. Thechanges begun with urbanization. Houses in urban areas comprise ofsmall apartments that cannot host a large family. Thus, the retireeshave to seek other options. Currently, more Chinese families preferstaying with fewer members. The deviation from the usual culturalpractices creates a need for facilities that can provide housing forthe aged members of the society. Some different studies have alsoresearched that most senior citizens prefer staying in nursing homesand similar places to staying with family members. The situation isusually worse when the person they stay with does not have youngchildren. There has been an increase in the number of people that optfor accommodations that assists the retired population. The tablebelow compares the number of people in two different nursing homesand the mode of payment used.
Figure3: Table showing the number of residents and source of daily incomein two different care homes (Feng et al., 2012)
Thefigures on the table show that more people prefer setting themselvesup in a good retirement household, even if they have to pay fromtheir own pocket. This trend will continue as more workers will besaving for the time when they have to retire and get assisted careliving. With the full understanding of how this demographic isexpected to grow in numbers in the coming years, more houses for theaged should be established.
Characteristicsof the Property Market in China
Inthe last two decades, real estate prices in China were increasingregularly. The trend went on until 2011 when the governmentintervened and brought about several policies that controlled thecost of houses. These regulations aimed at creating affordable housesand control of the market values. There are several aspects that makeChina’s real estate market different from the real estate marketsof the western nations. These characteristics are expounded in moredetail below.
Inthe last decade, urbanization in China began to increase faster thanprevious years. In 2006 the rate was at 44% and by 2011 it hadattained 51%. The estimated growth of urbanization by 2020 is set at60%. In addition to this factor, the average income of the peoplethat reside in urban centers has increased by 13% in those years.These facts show that as more people move into towns and cities,there will be a lot of demand for new housing projects since thecurrent ones are not able to serve every person. The increased incomewill enable the residents that are already in urban areas to upgradetheir living places, thus, fueling the need for more houses. When theaged are considered, many will become separated from their family dueto migration. The senior citizens will, therefore, need specialarrangements that can cater for their accommodation.
Lackof various investment opportunities
China’slocal financial market is still in the development stages. Citizensare not able to fully invest domestically. Foreign investments arenot an option due to the capital control instilled by the government.The pension system also does not function well enough for individualsto rely on it. The only choice most citizens opt for is to invest inreal estate since they see that as the only way of securing theirfuture. The graph below shows the amount that the Chinese citizensinvested in property from January 2014 to March 2015.
Figure4: Graph showing investment in real estate from January 2014 to March2015 (NationalReal Estate Development and Sales, 2015).
Thegraph shows that there was a steady decline in the percentageinvested into real estate development during that period. The reasonfor the decline is that many houses could not be sold and they endedup vacant. Once the government provides support to the privatebuyers, the investment amount will bounce back to the initial level.With the help of the administration of China, establishment ofproperties that work on caring for the aged will be achievable.
Thegovernment’s support on housing
China’sreal estate market has a unique feature whereby the administrationprovides various options for its citizens. Housing in the country iscategorized as social or private (Liu et al., 2014). Social housingmeans accommodation projects that the government controls throughvarious policies. They include economic housing, price controlledhousing, low rent housing, public rental housing, and slumredevelopment. Economic housing entails new houses that can bepurchased by low income earners at prices that are below the marketvalue. The price controlled housing system avails slightly largerhouses that are sold at higher prices to the citizens. The low renthousing consists of units leased to the low income earners (Liu etal., 2014). Public rental housing helps migrants and graduates havesomewhere to stay at cheaply. These individuals can eventuallypurchase the units once they meet the necessary criteria. Slumredevelopment handles rebuilding shanty areas with better qualityhouses (Liu et al., 2014). The private housing units sold at thestandard market prices and only the middle and high wage earners canafford them. The housing system is effective since majority of peoplein urban areas reside in government houses. The decision by thegovernment to privatize the public housing system in 1998 helpedboost the property market in China (Liu et al., 2014). Therefore,there are numerous opportunities for the development of housingprograms that cater for the elderly. The business prospects of such aventure are very promising.
Thereare several housing facilities for the aged in China that are runprivately. One standard method is setting aside an entire apartmentbuilding specifically to be used by senior citizens within aresidential compound (Chen & Powell, 2012). Such people can beable to associate with their family members that reside in the samearea. The only variance is that they do not share the same roof.Making the older generation stay close to the younger ones helps theminteract on a daily basis, thus, reducing stress and depression. Theindividuals are also able to enjoy specialized care when necessary.
Anotheridea is the creation of an entire facility that handles every issuethat concern the elderly from living independently to round the clockcare for those with terminal illnesses. An example of such a facilityis found in Shanghai and is called the Cherish-Yearn community. Theinstitution has 12 apartments that can accommodate around 1600 people(Chen & Powell, 2012). The place also has access to medical carefrom quality hospitals. The challenge is that it uses a membershippolicy when taking in new residents.
Arevolutionary idea is the creation of a retirement home that issimilar to a holiday resort in one of the tourist destination areas.A large enough facility that can house at least 5000 elderly peoplewill be a good step (Chen & Powell, 2012). The area should beequipped with all the necessary amenities such as medical care,recreational centers, a vast compound, and physical infrastructure.Many retirees would be willing to invest in such a place where theycan peacefully spend their time.
TheRole of the Chinese Government
TheAdministration of China has already anticipated the concern of theaging population. They provide various incentives such as tax breaksand low land prices to attract both local and foreign investors. Theyaim to solve the housing menace for the elderly by 2020 (Banister etal., 2012). They understand that as their productive populationcontinues to grow older, the future returns may begin to dwindle. Thebest alternative for them is to invest in real estate.
Beforeone establishes a home for the senior citizens, there are differentprofessionals that should be considered. The first one is the realestate developer. The individual will use their skills and experienceto acquire the land needed, to set up comprehensive building plansand obtain the necessary permits (Banister et al., 2012). Such aperson may not have the knowledge of caring for the elderly and maysee the venture as non-lucrative in the long run. With landincentives and tax breaks, they can be convinced to invest in theproject.
Insurancecompanies can be another stakeholder whose main purpose is to providethe funding for the project. They can be enticed by the opportunityof securing thousands of clients if they participate in theconstruction of a detailed housing facility for the elderly (Banisteret al., 2012).
Medicalproviders are a necessary group to include in the project. They arethe ones that will be working closely with the senior citizens whileproviding them with the best care available (Banister et al., 2012).This group has to be part of the project’s team since their inputwill be vital from the very beginning.
Asthe population of the elderly Chinese citizens continues to increase,the aged members of the society will be having difficulty inobtaining a retirement home where they can be safe and comfortable.The existing housing facilities for the seniors are few and notcapable of handling the large numbers that will soon begin to show upin the coming years. Modern times have altered the former familysettings and these individuals can no longer hope to reside withtheir family members like it was in the past. Housing units have alsobegan to reduce in size whereby they can only accommodate around 3people. These factors create a steep demand in the real estate marketof China. The issue is that the present supply can hardly withstandthe population of the seniors. In a few years, the demand for nursingand retirement homes will be extremely high. Many of these peoplewere working all their lives and majority have a savings plan fortheir retirement. Therefore, the purchasing power is inconsequential.More apartments for the retired members of the community have to bedeveloped. That is the only solution to the menace. The Chinesegovernment is more than willing to provide various incentives thatought to attract investors. The real estate market in China,especially for the development of housing for the elderly is a soundbusiness prospect.
Toresolve the housing concerns for the aged residents of China, morefacilities have to be established. Those individuals are more thanwilling to spend their savings on a quality place of residence sincethey do not have a better alternative. The administration’sstrategy of attracting more investors for the development of seniorhousing is a good plan. An idea that might increase the returns fromthe venture is for the government to set up a pension plan that paysa certain percentage of the cost of living in such an establishment.The citizens would, therefore, be looking forward to their retirementage since they will know that they have planned well for theirfuture.
TheChinese government could also offer to buy the privately ownedapartments and then modify them to suit the needs of the retiredpopulation.
Thebest option for anyone that seeks high returns for their investmentis to look into the development of a huge housing complex thatspecifically caters for the aged people in the community. The aboveinformation fully describes why China’s real estate market for thesenior population is expected to grow exponentially. It is crucialthat such a chance is grabbed before any other people benefit aheadof this group.
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