Mr Lim Ming Yan, President and Group Chief Executive Officer of CapitaLand Limited introducing a model of Raffles City Chongqing to Mr Zhou Naixiang, Mayor of Suzhou, Jiangsu Province, China at the World Cities Summit 2014
Mr Lim Ming Yan, President and Group Chief Executive Officer of CapitaLand Limited introducing a model of Raffles City Chongqing (one of the Group’s eight Raffles City developments in China) to Mr Zhou Naixiang, Mayor of Suzhou, Jiangsu Province, China at the World Cities Summit 2014

The China property market is still promising. That was the view presented by President and Group Chief Executive Officer, CapitaLand Limited, Lim Ming Yan, at the China In-Focus forum of the World Cities Summit held in Singapore in June 2014.

Attended by more than 200 people comprising senior delegates from government, industry, international organisations, and research institutes, the forum aimed to tap on their expertise to identify the challenges, solutions, and opportunities that come with China’s growing urbanisation.

In his positioning speech entitled ‘Riding the China Urbanisation Wave: CapitaLand’s Story’, Mr Lim shared insights from CapitaLand’s 20-year journey into China . As one of the earliest foreign developers to invest in China, CapitaLand has seen first-hand the rapid social and economic transformation of the country.

The Group has also played a part in China’s development. Since its foray into the country in 1994, CapitaLand has developed more than 40,000 homes in China with nearly 70,000 more to come; eight Raffles City mixed-use developments, four of which are in operation; 62 shopping malls of which 51 are operational; more than 10,000 serviced residence units; and 12 private equity funds.

Trendspotting in China

Citing China’s urbanisation goal of at least 60 per cent of residents living in urban areas by 2020, which implies that approximately 100 to 115 million people will relocate from farms to cities, Mr Lim estimates that this could generate demand for about 35 million more homes over the next seven years.

“Urbanisation will continue to drive fundamental demand in China,” he added.

By his estimation, there remains room for growth as China enters the next lap of its economic development. "There is still significant real demand for homes and real estate in key Chinese cities," he noted.

The next trend he observed was a shift in demographics, in particular the ageing population. The percentage of working age (15-64 years old) population in China has already peaked and started to decline since 2011. Also, increase in wages in recent years is leading to the “end of the cheap labour era”. Already, many companies are moving their businesses away from the coastal region to manage rising costs. In the more developed coastal regions and gateway cities, the services sector will step up and replace the traditional secondary industries, and that will boost the underlying demand for commercial space.

Noting that developers can enhance liveability and “play a major role in contributing to better cities in China”, Mr Lim outlined plans to make CapitaLand’s developments more inclusive and accessible to all (e.g. elderly-friendly and handicap-friendly) by adopting a Universal Design approach. Ensuring better indoor air quality is yet another thing the developer is already looking into.

To lighten the environmental footprint arising from urbanization in China, CapitaLand has increasingly introduced green technology and the use of sustainable materials in its projects. Mr Lim shared the example of Raffles City Chengdu’s use of green technology which won it the LEED-CS Gold level certification by the US Green Building Council, the first development in Southwest China to be accorded this accolade.

Mr Lim noted that there is also a growing trend of denser and more compact cities in China, in which mixed-use developments can help “enhance the quality of China’s urbanisation”. Riding this wave of change, CapitaLand has been turning its focus towards mixed-use developments. Developing well planned and integrated mixed-use developments can be “an efficient solution for city diseases such as congestion and pollution”, especially in dense and built-up cities.

“Locating an office building and a shopping mall together helps to even out the loading. This allows us to not build so many car parks and to maintain the development in such a way that tenants can enjoy a continuous flow in traffic and demand, not seen in stand-alone projects,” explained Mr Lim, drawing on the example of the Raffles City mixed-use developments in China.

There are, however, some challenges in China’s urbanisation thrust such as the local government funding model. Centralized economic targets and an inadequate local government funding model have led to non-optimal spatial planning in some Chinese cities. Because local government revenue typically covers approximately 60 per cent of local government expenditure, the remaining has to be raised from other sources such as central government transfer payments and land sales.

“The local governments will tend to over supply land,” he cautioned. “There may be a tendency to sacrifice long-term benefits for short-term results.”

For instance, some cities in China have drawn up master plans for new Central Business Districts (CBDs) in a bid to generate revenue from land sales and recurrent taxes. This has led to multiple CBDs and an oversupply of commercial property in Chinese cities now.

But Mr Lim shared that the central government is already taking steps to address the issue, such as allowing local governments to issue bonds to reduce their reliance on land sales.

"We are heartened that reforms to the local government funding model are under way."

Mr Lim added, “I am confident that China can unleash the potential from high quality urbanisation.”

This is an upbeat sentiment well worth heeding since CapitaLand has been a major player in the Chinese real estate space and has plans to deepen its presence there in the years to come.

This article is contributed by Toh Shaowei , Senior Manager, Market & Strategy Insight and Corporate Planning, CapitaLand Limited.