With the rapid development of China’s economy, luxury real estate investment has become a hot topic. The real estate market has huge potential, especially high-end properties in first-tier cities. Luxury properties can not only meet accommodation needs, but also have investment value. This article will analyze the promising prospects of luxury real estate investment from several aspects. First, the demand for luxury properties will continue to grow as high-net-worth individuals increase. Second, luxury properties in core urban areas have limited supply. Third, luxury properties can hedge against inflation. In addition, blockchain technology makes real estate investment more transparent and convenient. Although luxury real estate investment also faces risks like policy regulation, it is still an attractive option for investors with a long-term perspective.
The number of high-net-worth individuals in China sees steady growth, driving demand for luxury real estate
According to Hurun Report, China has over 1.05 million US dollar millionaires in 2022, with an increase of 35,500 from 2021. The number of high-net-worth individuals keeps rising steadily in China. These wealthy individuals have strong purchasing power and the demand for luxury properties. First-tier cities like Beijing, Shanghai, Shenzhen and Guangzhou are the top choices for luxury real estate investment. In addition, as Chinese wealth spreads to lower-tier cities, the potential luxury real estate market in these areas should not be ignored.
Limited supply of luxury properties in core urban areas leads to huge potential
Luxury properties are usually located in core urban areas with mature supporting facilities and convenient transportation. However, urban planning restrictions limit new supply of luxury real estate projects in these prime locations. For example, in 2022, among newly launched residential projects in Beijing, those priced above 80,000 CNY/sqm only accounted for 1.1%. While in Shanghai, new projects priced over 100,000 CNY/sqm made up 0.6% of total new supply. The scarce supply and strong demand create huge potential for price appreciation of luxury properties in central areas.
Luxury real estate can hedge against inflation
Investing in luxury real estate can combat inflation. As a hard asset, high-end property values usually increase along with inflation. This is especially true for scarce luxury real estate resources in first-tier cities. For instance, according to Soufun, among 35 Chinese cities tracked, average new luxury housing prices went up around 10% in 2022, significantly higher than general CPI inflation. Historical data shows that premium real estate tends to perform well as an inflation hedge.
Blockchain technology improves liquidity and transparency of real estate investment
The application of blockchain and tokenization makes fractionalized ownership of real estate possible. Platforms like LABS allow investors to purchase tokenized shares of properties with low entry barriers. Blockchain’s features like tamper-proof transaction records and traceability also enhance transparency and security of real estate investment. Although still in its infancy stage, blockchain is expected to truly disrupt the conventional real estate industry by improving liquidity and reducing costs.
In summary, luxury real estate investment has promising prospects in China, driven by factors like rising high-net-worth population, limited prime location resources and inflation hedge attribute. With blockchain application, real estate investment could become easier and more transparent. Despite potential risks, luxury properties are worth considering for investors with long-term views.