Bright lights

July 13, 2011 / By  

I’ve just finished reading an interesting book by Leslie T. Chang called Factory Girls of China – basically, amongst other things, a true account through the eyes of girls on Dongguan’s factory lines of the largest human migration in history. You see, I grew up in a small village on the west coast of Scotland. Growing up as a kid the population was circa 400, the nearest McDonalds was 150 miles away and the local bank opened only on a Thursday from 10-11am! Fast forward 20+ years and my home is now 6,000 miles away slap bang in the heart of a city of 7 million people, on the edge of the world’s most populous country. The nearest McDonalds is 400 yards from my front door and I can go to a cash machine 24/7 without crossing the street.

Why am I telling you this? Well, such are the lure of the bright lights of a city and it’s the same phenomenon the world over. Fifteen and a half million more Chinese citizens lived in cities last year and 1,200 Indians hopped off a train or a bus and arrived in Mumbai this morning. Their circumstances or backgrounds may be different to mine, but the same motivations as I had prevail – to open their eyes and better their lot.

Urbanisation is something we talk about almost daily as researchers and it’s often easy to forget just how important this is, and will remain to be, for the regions real estate markets. Not only does urbanisation create a direct demand for real estate in the form of housing – indeed we’ll need to build residential space equivalent to that of 45,000 Empire State Buildings in AP cities over the next 10 years just to house the people moving to our cities.

But, as people move to cities, their aspirations grow, their income generally rises and they dispose of this in the form of retail therapy – be that subsistence or indulgence. Nowhere better demonstrates the impact that growing wealth can have on luxury retail sales than my new home town of Hong Kong. The “retail mecca” of China; the urbanisation and rising wealth in mainland China has been kind to her little sister across the border. Where else in the world would you find people lined up down the street daily outside of Louis Vuitton, even in a torrential downpour?! Indeed stunningly, nothing exemplifies this more than the fact that the world’s number one export location for the Swiss watch industry is this little outcrop on the coast of China. Sales to Hong Kong account for almost twice as much as the whole of the USA annually, yet the population here is a mere 2.3% of theirs.

Urbanisation will continue in Asia for all of our life times. Besides the obligatory cyclical downturn and inevitable market corrections along the way, the evolution of the region’s real estate investment markets will forever charge forth in my life time, because people, just like me, want to leave the village.

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