The debate around Chinese property market has been going on for years. It seems more and more likely that the bubble is about to pop sooner than later. In this article, I 'd like to use Chinese demographic change in the next 20 years as blue print, to check the "hard demand" of the potential property buyers in China
(live birth by ten thousand from 1949 to 2012) (Wiki)
The calculation of potential demand is
Total demand = Sum of age group (51-60)*X+ Sum of age group (41-50)*Y+ Sum of age group (31-40)*Z+ Sum of age group (21-30)*L
Bases in determine "X" "Y" "Z" and "L" is generalization of information from western publication and information available in China as today.
The total share of demand to invest in property market from people between 51 to 60 is around 24% in the west, for 41-60 is 26%, 31-40 is 32%, and 21-30 is 18%. Source:ghostdigest.co.za/resources
Applying these multipliers we can have the chart below
We will see demand slight dropped starting 2013 and bottomed out by the end of 2015. Then it will rise gradually until 2022 then fall off the cliff due to the huge amount of people born at the year 1963 retired during 2023.
I have great doubt about the western multipliers can be used for China
First, it showed between 2009 and 2012 demand barely increased which is contradictory to what we have witnessed on the ground. We see huge demand during the last three to four years which resulted in property price doubling, albeit financial crisis in the west.
Second, simply base on the fact and news that the average age in China at 2009 is 37 years old, but the "average age for buying property is 27 years old comparing around 35 years old in the west", we can argue more people from the younger age group are buying properties.
I make this assumption that for age group 20 to 36 and 37 to 60, the amount of years by the multiplier will equal 27 years old in China
if X=1 then Y=0.46
It means that for the age groups between 20-36 and 37+, there must be 2.2 times demand coming from younger age group in order to make the average buying property age to be around 27
So the situation in China should be something like this
51 to 60, is about 9%, for 41-50 is 26%, 31-40 is 34%, 21-30 is 31%.
It makes sense from my observation that for people aged above 50 to buy property, almost 90 percent of them are buying homes for their children between 21 and 30. Little demand for investment within this group is also because people in china started retiring at age of 50 for women and 55 for men. Considering relatively low retirement fund for people retired between 2000 and 2010, it resulted in limited ability for people from this age group to invest in property market.
Now the chart will look like this
So does it mean demand peaked in 2012?