Such is the pace of change, 10 years in property in China is the equivalent of 20 years anywhere else in the world. I have to pinch myself every now and again when I stop to consider the market 10, let alone 15, years ago. So for me to prepare a 20 outlook it is actually sufficient to talk only about 10 years.

Despite today’s choppy waters, and 2008 is shaping up to be a tough year for China real estate, I fully expect average across the board prices to roughly double in the next 5 years, plus or minus 15% or so. Sound like a lot? Taken at a compound rate it is not far from the current GPP growth rate. By, say, 2020 the major cities in China particularly Shanghai as a global financial centre and host to a booming local finance industry with a number of new household names will be the most expensive city in the world to live in.

China is not all about Shanghai and Beijing however. In 5 years time as we look back fondly on a brilliant 2008 Olympic games in Beijing, we will come to realize that this was a turning point for China’s place in the world. The year when all those other cities around China started to enter our consciousness. 10 years hence we can expect markets in places like Shijiazhuang to have become as familiar to investors as Chicago and even for overseas investors to have learnt to pronounce it, just as Americans and Japanese learnt (some of them anyway) to pronounce Leicester and Edinburgh. Today we hear lots about second tier cities, a decade from now I would expect them no longer to be referred to in this way, third and dare I say it fourth tier cities will be experiencing a third or even fourth cycle of investment.

Distant commentators, and others that make a living out of doomsaying, will still be talking about China’s property crash which will still be ‘just around the corner’ but the inevitable will of course be 10 years closer. What makes me so sure of this? Just as night follows day, property booms are followed by property busts, the chain of events set off by housing reform in 1998 will inevitably lead to China’s first property crash. Even today we are hearing talk of a Japanese style economic meltdown and the scenario is worthy of consideration. The important question is when. My best guess is that it lies beyond my 10 year horizon, just. China is still a long way behind where Japan was in the early 1990’s, another 10 years of feast before the famine sets in.

What are today’s far off investment sectors (holiday homes, retirement homes etc) will be considered core investments with specialist developers and operators well established. Chinese insurance companies will have pioneered a new model for pricing retirement home investment risk that will be adopted worldwide and lead to complaints about IP infringements from the Chinese pioneers who forgot to protect themselves in the US. Holiday home markets in locations as diverse as Huangshan, Beihai and Sanya will be serviced by low cost airlines, who to the relief of everyone do not serve food, and be as mainstream as Australia’s Gold Coast, Hawaii and Monte Carlo.

As for taxes, ‘Crispin’s First Law’ of China property tax suggests that property taxes can only increase. Home owners will be paying 0.25 to 1% of property value to the government annually. There will have been a spate of protests about the collection of this tax from those who see home purchase as something they only considered because of government policy, made using loans from a government owned bank and, most likely, from a government owned developer.

To put all this more succinctly, China has become a normal property market, it is mainstream. Property remains an emotive political ball that no politician dares to kick too hard. The most important thing for all this to happen of course is full convertibility of the Rmb which will surprise everyone by being announced sometime between 2010 and 2012, soon after the Chinese currency will become the favourite of souvenir vendors in a tourist spot somewhere near YOU.

Sam Crispin has China experience from 1988 and has been living in Shanghai since 1994. Contact him on samcrispin@msn.com

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