Beijing should spur the development of retirement housing for the mainland's growing population of senior citizens by offering incentives to private developers and investors, an analyst says.
Thomas Lam, head of Greater China research at Knight Frank, says developers and investors are still searching for a viable business model despite the strong demand.
'The government and the Social Security Fund should take the initiative to help support retirement housing by offering incentives to developers to build this specialist form of housing,' said Lam, adding that tax incentives or construction subsidies could be considered.
Municipal governments could sell land earmarked for retirement homes at lower prices, and the fund could initiate a pilot partnership scheme with private developers to provide affordable housing, Lam wrote in a report this month.
The mainland's housing market mainly consists of private housing and affordable social housing. Only a small portion of serviced apartments and retirement homes are provided for the elderly.
In contrast, retirement housing is well established in the West. They comprise roughly 9 per cent of housing stock in America and about 2 per cent in Britain - compared with less than 0.1 per cent in China.
However, some developers have begun investing in retirement housing on the mainland due to the market's strong potential.
For instance, China Vanke, the nation's biggest listed property developer by assets, is building a retirement housing project in Beijing's Fangshan district. It will reportedly launch the project by year-end. Meanwhile, Poly Real Estate plans to market its retirement community project in Beijing this year and start a new project in Shanghai next year.
Other developers and insurance firms have also invested in various such projects, Knight Frank says.
Nevertheless, the mainland's retirement housing market remains nascent, Lam says. 'The financing of homes for the elderly is difficult,' Lam said. 'Banks are unwilling to offer mortgage loans to the elderly, fearing foreclosures due to death.'
Consequently, even senior citizens with one or more properties can find it hard to finance their purchase of such flats. That's particularly given the lack of reverse mortgages, which are popular among American senior citizens since they allow owners to borrow money against the value of their homes.
Developers' reluctance to invest in retirement housing projects is also due to the higher costs involved in meeting customers' need for specialist facilities, a location close to good transport links, and a noise-free environment. The ensuing property prices become unaffordable for many retirees as developers seek to recoup these higher costs.
But with continued strong economic growth and greater co-operation between the private and public sectors, retirement housing can play a more important role in the property market, Lam says.
The number of people aged 60 or older at the end of 2011. The number of people aged above 65 is expected to reach 323 million by 2050