Reduced population in China is harmful to its real estate market

The Chinese real estate sector has been fighting the recess for years. Now the shrinking population throws another shadow over the stagnant real estate market.

Goldman Sachs estimates that the demand for new houses in China’s urban cities will remain suppressed less than 5 million units a year in the coming years – one fourth peak of 20 million in 2017.

“The fall of the population and slowing urbanization suggest a decrease in housing demographic demand” in the coming years, said Goldman Sachs economists on Monday.

According to the country’s population, by 2035 it will decrease to 1.39 billion 1.41 billion, according to World Bank’s latest dataHe said Tianchen XU, a senior economist of the intelligence unit, citing a combination of fewer newborns and more deaths from aging population.

In the reduction of the population, the demand for the house by 0.5 million units annually in the 2020s will be reduced and will lead to more deputies in 1.4 million units annually in the 2030s, according to Goldman Sachs, compared to the positive contribution of 1.5 million units in the 2010s when the population was constant.

The birth rate in the country continues to fall Even after Beijing relaxed his policy with one child in 2016, and despite Beijing’s efforts to stimulate children who carry the presence through cash incentives. Stagnant income, instability over work prospects and a poor social insurance system were dissuaded by Chinese young people from the birth of more infants.

Beijing’s proclamatist policy will probably have a “limited effect” as they do not resolve deeply rooted issues, SU, for example, high economic costs for children carrying children and the tendency to postpone marriage to progress careers and “embrace individuality”.

Emphasizing the decline in birth, almost 36,000 kindergartens have closed over the past two years, and the number of students in preschool institutions has decreased more than 10 million. This is according to CNBC’s calculation The data was published by the Ministry of Education. Exactly the same Number of elementary schools It fell by almost 13,000 between 2022 and 2024.

This is a pulsation in the housing markets adjacent to the school, which once saw inflated prices in the background of high demand for the best public schools.

Once the unambiguous prize was fueled by access to elite schools and expectations for the growth of property values. According to William Wu, Daiwa Markets Daiwa Capital Markets Real Estate Analytics began to decrease the population and local authorities, which scale enrollment policy added by the value of these houses.

A 7-year-old boy in Beijing told CNBC that the price of her apartment decreased by about 20% more than two years ago when she bought it. It cost her about twice the average price for the apartment in the city so that her son could study at a good elementary school.

According to two decades, the number of children enrolled in elementary school in 2023 reached the highest level in two decades before refusing in 2024 in the year that her son recorded.

This demographic shift is an additional circulation on the real estate market, which since the end of 2020 has come out of a painful downturn since the end of 2020. Despite the raft Central and local self -government measures Since September last year, the real estate recessed has demonstrated few reducing.

According to Larry Hu, the chief economist in Macwar, new housing prices have fallen at the fastest pace, extending two -year stagnation, despite the efforts of the government aimed at arresting decline.

In the first half of this month, the sales volume in 30 major cities decreased by 11% a year, deteriorating with a 3% decrease in May, Hu said.

“Investment owners are likely to be clean sellers (for owners) in the foreseeable future,” about the expectations that housing prices will continue to fall, evaluates Goldman Sachs.

While Goldman expects the level of urbanization in the coming years, causing damage to the demand for urban housing, said the demographic drag on the real estate market is not “inevitable” and may take decades.

In the near future, “part of this decline will be offset by constant urbanization and demand for housing update,” Wu said, since the latter will take into account the increasing share of total housing demand in China.

– Evelyn Chen in CNBC contributed to this story.