When in 1997 Singapore entrepreneur Zhong Sheng Jian’s Yanlord Land launched what today is one of his most successful Shanghai residential projects, Yanlord Riverside Gardens, there were hardly any buyers. “I thought, ‘How could no one want this property?’” Zhong recalled in a recent interview with Forbes. More than a decade and a half later, real estate in that area is worth more than 10 times what he charged customers.
Later, in 2004, Zhong started buying land in Zhuhai, the southern city near the Chinese gambling mecca of Mecca, amid skepticism. “People said: ‘Buying power is limited,’” he remembered. Now, many Yanlord buyers have made money on its upscale residences there, too. Zhong’s ability to go against the grain helped to land him at No. 21 on the 2014 Forbes Singapore Rich List published today with a fortune worth $1.4 billion. (Click here for the full list.)
At a time when real estate prices in China have been falling, 56-year-old, China-born Zhong is wary about making any predictions where market prices are heading in the mainland. “It’s very hard to say,” he said. Yet investors are sticking with him. Singapore-traded shares in Yanlord -- who business is focused on China— are little changed, hence outperforming some of the mainland’s biggest real estate brands. Among them, Country Gardens, led by Chinese billionaire Yang Huiyan among them, have lost 10%.
Though unwilling to speculate about prices, Zhong did explain what believes will be some of the biggest trends shaping China’s real estate market in the coming years. The one he zeroed in on most: Opportunities arising from continued urbanization in the world’s most populous nation. About half of China’s 1.4 billion people live in rural areas, and about 1% of the nation has been moving to cities every year annually for the past three decades.
In relatively well-off cities in geographically confined regions, cluster effects will create new real estate business, he said. Regions with good growth prospects include Yangtze River Delta around Shanghai and the Pearl River Delta in Guangdong Province, he said.
“People are gathering together, internationalization is deepening, and this will attract people from elsewhere,” boosting demand for real estate, Zhong said. Populations in those areas will increase as people seek good medical care, easy transportation and good schools, according to the developer. Investments that improve logistics and ease bottlenecks also offer promise, as do businesses that entertain citizens.
Southern China -- the area from which Zhong hails – holds particular promise because of a changing dynamic between Hong Kong, Macau and the rest of the region. He feels that a new bridge linking Zhuhai, Hong Kong and Macau, due to open 2016, will stimulate the whole region and especially help Zhuhai. “We expect Zhuhai will have a lot of new development,” Zhong said.
Another important trend, Zhong said, is increasing sophistication of Chinese consumers when it comes to real estate investment. In particular, they are more willing to buy real estate that they once shunned. “People use to think high floors were bad because the building maintenance and service in those floors wasn’t so good,” yet they now know better, Zhong said.
Overall success also requires understanding that tech-savvy young buyers are looking for digital systems for the home, Zhong said. “We have to divide the market between young buyers and older buyers,” he noted.
More carefully managing technology services is just part of the change in China’s real estate industry since Zhong entered the business in the early 1990s. Another difference for developers lies in access to capital and trends in industry returns.
“It used to be that you could use a small amount of capital and do a lot of things,” Zhong said. Now, investors need to tie up more of their own cash, and that will put a lot pressure on developers. “You have to continuously be thinking about risk management,“ he said.
The solution in the marketplace: Innovation. “If you don’t innovate, you will die,” he said. Besides picking good locations, Yanlord famously succeeded in the 1990s from bringing new ideas to market, such as prefinishing apartments than selling than selling just as empty shells with cement floors. A tough market in China will test Yanlord’s creativity in a new era.
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