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APREA: China's property market to surpass Japan by 2014

By the end of 2013, Japan will have $2.76 trillion of investment-grade real estate stock, whereas China will have $2.81 trillion, according to a recent joint study by APREA and PREI.

China’s investible real estate market is projected to grow to $9.7 trillion by 2021 and $26.4 trillion by 2031, and the country could become Asia’s largest real estate market by as early as 2014, according to a recent joint study by the Asia Pacific Real Estate Association (APREA) and Pramerica Real Estate Investors (PREI).

As a whole, the Asia-Pacific region has $7.2 trillion of investment-grade stock, or 27 percent of the global total. That number is expected to grow by about five times over the next 20 years to almost $45 trillion. By 2031, the study predicts that Asia will make up 49 percent of the global real estate investment universe.

Out of all Asia, it is no surprise that China is expected to grow the most. The study indicated that China would have an average annualized growth of institutional-grade real estate of 18 percent over the next 10 years – the highest in the world. Japan, currently the Asian country with the largest amount of investible real estate, will have a growth rate of just 1.5 percent over the same period.

At that rate, China is expected to surpass Japan as Asia’s biggest real estate market by 2014, according to Henry Chin, director and head of Asia-Pacific strategy and research at PREI. By the end of 2013, Japan will have $2.76 trillion of investment-grade real estate stock, whereas China will have $2.81 trillion, he told PERE.

Once that happens, China will be second only to the US in terms of investible real estate stock, according to the APREA study. Chin predicted that capital values in China will increase steadily over this period, and he is most positive about the logistics and residential sectors.

The rest of the developing Asian countries are expected to follow a similar pattern to China, though not nearly as pronounced. Developing Asia ex-China accounted for only 3 percent of the investment-grade real estate assets worldwide in 2011, and that figure is expected to grow to 10 percent by 2031, or about $9 trillion, according to the study.

APREA and PREI based their projections on GDP growth forecasts of each country up through 2031, as well as development projects currently underway. However, projections were not calculated to include the possibility of an extreme GDP slowdown in any country.