China’s leading insurers betting big on developing communities tailor-made for older residents
China’s 222 million over-60s potentially provides a massive, largely untapped housing market – but in reality, obstacles abound
On a cold, rainy November day, a group of middle-aged and elderly women huddled in warm residential showrooms in a downtown Beijing office.
The sales manager patiently explained how the floors were slip-proof and how the lamp switches on the wall have been lowered to help older residents.
The women listened carefully. The finer details impressed them.
They were particularly taken with movable coat hangers in the wardrobe, for instance, that enable users to access coats beyond their reach, and the chairs with rollers, that are easy to move.
They were also intrigued by the mobile app, that enables them to call for a care worker, at any time of day or night.
This was no typical tour by a developer, though. The presentation was by China Taiping Insurance Group, one of the country’s largest, which is now planning to a chain of community facilities suited especially to senior living.
After touring the showrooms, the women were told that customers who buy a two-million yuan life insurance policy with the company would be entitled to a unit in a community currently being developed in Shanghai’s Pudong.
“Globally we face a low interest rate, low-yield environment,” the manager told the audience, with an assured manner.
“The annual yields of online money market funds has dropped to 2 per cent. The stock market is volatile and peer-to-peer lending is risky. How can you find a product that is both safe, and rewarding?” he asked.
His answer is a Taiping policy guaranteeing 2 per cent annual yield. Purchasers can reserve a place in a future senior-care community, and borrow up to 88 per cent of the premiums.
China’s insurance regulator recently stipulated an 80 per cent ceiling, so his offer is among the last at such a high borrowing ratio, he added.
China Taiping is partnering with Dahlin Group, a US-based architecture and planning service company, to build the giant community in suburban Shanghai, with an around 3,000 rooms.
The insurer has committed to building six to 10 such communities over the next five years.
By then, Taiping customers could be living in a Beijing’s project during summer and in tropical Hainan province during winter, in what the company is calling “migration-style senior living”.
But Hou Guifeng, a 55-year old visitor, had her doubts.
“The Shanghai project is pretty much in shape, but I’m not so sure of my chances of getting a place to live in Hainan, if too many others want to live there too.”
Hou’s concerns are not without reason.
Last year, Union Life Insurance, a private insurer among the first to invest in senior-care facilities, was reported to have run into difficulties with its own expansion plans inand other cities. It has experienced low take-up rates at its earlier projects in Wuhan, Nanning and Shenyang, and has halted construction at projects in Jinan, Zhengzhou, and Harbin.
China’s 222 million over-60s potentially provides a massive, largely untapped market for the senior-living industry – but in reality, obstacles abound.
Many companies didn’t realise just how demanding a market it can be, until they started trials, said Fu Linjiang, president of Hangzhou-based developer Bluetown Group.
Real estate companies have also started to realise, to their cost, that such projects take time to recoup their investments, require highly experienced staff to run them, and are expensive to develop.
Theoretically, insurers could have the upper hand, given their industry is generally about long-term investment, and much less about short-term return.
Building senior-care facilities, as the Taiping Insurance case illustrates, offers an excellent sales avenue for policies too.
“The life insurance industry model is well-suited to building communities for senior living,”said Tuo Guozhu, an insurance professor with Capital University of Economics and Business.
“It’s involvement will help to significantly cut funding costs for such facilities.”
China Taikang Insurance Group has also bet big on the idea, investing 20 billion yuan on eight senior living-hospital complexes across China, two of which – Beijing and Shanghai – are already open.
China Life, New China Life and China Pacific also have plans in place.
“A friend of mine recently deposited 400,000 yuan with a company to reserve a room in a Beijing senior-citizens apartment complex,” one visitor to the Taiping presentation explained.
“But some have told me there are long waiting lists for the best.”
Supply in the bigger cities such as Beijing and Shanghai is particularly acute, as land costs there have skyrocketed.
Demand is weaker in smaller cities, and costs more affordable in smaller cities. But demand is also weaker there, particularly for the upscale apartments that are more lucrative.
Tuo added that there are strict limits put on insurers trying to sell apartments built for the elderly, so in some cases they are already having to rent out units to recoup their costs.