Summary of Key Points
As the real estate sector enters an era of existing inventory, the elderly population with savings and time (aged 60 and above) has become a new source of housing demand in some cities, especially those in the third and fourth tiers. Many places are supporting the development of tourism and health care industries through policy initiatives. However, the real estate industry in this sector must move away from the traditional mindset of simply selling houses and focus on long-term operational capabilities and innovation in financial tools to transform the elderly economy into a sustainable business opportunity.
1. Housing Needs of the Elderly Population
In the past, the elderly might move to new environments for medical treatment. Nowadays, they are more actively choosing a "migratory retirement" lifestyle—going to Yunnan or Guizhou for summer retreats and Hainan or Guangxi for winter stays, or living in cities with good air quality and low costs for an extended period. For example, Shao Min from Shanghai has lived in Jingdezhen for ten years; she bought a house there not because she expected the price to rise but because of the local environment, slow pace of life, and low cost of living. Wentang Town in Yichun, Jiangxi, is often referred to as "Little Shanghai" due to the large number of elderly residents from Shanghai, with the elderly population accounting for 28% of the total local population.
The needs of these elderly people have changed: they are no longer concerned about property price increases but rather about the quality of the environment, the convenience of medical care, and whether there are peers in the community to interact with. Short-term rentals are also popular; for instance, Ms. Zhang's mother in Chengdu rents a place in Yunnan for two to three months during the summer. This has created new demand in third- and fourth-tier cities with high housing inventories.
2. Cities Competing for the Elderly Population
To attract this demographic, various cities have introduced comprehensive incentives:
- Qingdao: The first city in China to introduce a systematic policy for health care real estate, allowing for installment payments on land (up to one year), selling houses even when they are only partially built, providing developers with low-interest loans (as low as 1.25% annually), and even integrating medical insurance into the projects to reduce healthcare costs.
- Yantai: Aims to grow the elderly care industry to over 50 billion yuan by 2028, focusing on summer retreats and health treatments.
- Hainan: Promotes health care using traditional Chinese medicine, forests, and hot springs.
- Jilin: Plans to add 30,000 new beds for migratory elderly care.
- Many cities are also looking at revitalizing idle assets by converting vacant old buildings into health care communities, which helps address inventory issues while meeting the needs of the elderly.
3. Challenges in the Health Care Real Estate Sector
Real estate companies recognize the potential of this market but are hesitant to enter:
- Past lessons: Many previous elderly care projects were merely a guise for selling houses; after sales, they were neglected, leading to overcrowding and price drops (such as seaside vacation homes).
- Current difficulties: Success requires not only building quality housing but also providing daily services such as health check-ups, meal delivery, and social activities. The initial investment is high, and the exit strategies (such as selling assets) are not well-established.
- Higher expectations from the new generation of elderly: The post-60s and post-70s generations have money and ideas; they require a good environment, health management, and social networks, all of which require professional operational skills that developers often lack.
4. International Best Practices
Abroad, there are established models for making the health care real estate sector successful:
- United States: Elderly care communities are considered a separate asset class, financed through REITs (Real Estate Investment Trusts). Companies like Welltower own these communities and nursing centers and hire professional organizations to manage them, generating stable cash flows from resident fees and services.
- Japan/Singapore: Use asset securitization to attract more investment for long-term operations.
China is also adopting these practices: In 2024, the government plans to include elderly care facilities in the REITs framework, and Qingdao's policies support insurance funds to invest in health care real estate through REITs. This means that projects can generate revenue through long-term operations and financial tools, rather than relying solely on housing sales.
5. The Future of the Industry
Whether the elderly population can become a new driver for the real estate sector depends on whether cities and companies can shift from selling houses to providing a quality lifestyle. This requires not only a transformation in the real estate industry but also a change in urban development strategies.
In summary, while the elderly population indeed presents new opportunities, whether these can be realized depends on whether cities and businesses can offer what they need—a good environment, convenient healthcare, and suitable amenities. Only then can the elderly economy become a sustainable business opportunity, rather than just another round of "land grabbing" for housing sales.