The decrease in the population of China is harmful to the real estate market

The real estate sector in China is struggling with deep shrinkage for years. Now the volatile population is underestimating another shadow on the real estate market.

Goldman Sachs estimate that demand for new homes in Chinese urban cities will remain a suppression of less than 5 million units annually in the coming years – a quarter of a peak 20 million units in 2017.

“The decrease in the population and the slow urbanization indicates a reduction in demographic demand for housing” in the coming years, “economists in Goldman Sachs said in the Monday note.

The country’s population is estimated to be less than 1.39 billion by 2035 1.41 billion, according to the latest World Bank data“Citing a mixture of a number of newborns and more deaths from the aging population,” said Tianchin Show, chief economist in the Economic Intelligence Unit, citing a mixture of fewer newborn children and more deaths from the aging of the population.

The shrinking of the population will paralyze the demand for homes by 0.5 million units each year in 2020s, and leads to a degree of more than 1.4 million units annually in the 1930s, and Goldman Sachs estimates, compared to the positive 1.5 million units in 2010 when the population was at a fixed rise.

The fertility rate in the country continued to decline Even after Beijing relaxed its single policy in 2016, and despite Beijing’s efforts to motivate children through cash incentives. It has stabilized income and instability on job prospects and the bad social security system, Chinese youth, to have more children.

Shaw said that Beijing Pronatalist is probably a “limited effect” because it does not address deep roots, such as the high economic costs of capturing children and the tendency of people to postpone marriage for career progress and “embrace individual”.

This confirms the decrease in birth rates, nearly 36,000 kindergartens have been closed throughout the country over the past two years, with the number of students in pre -school decreased by more than 10 million. This is according to the CNBC account for the official Data published the Ministry of Education. Likewise, the The number of primary schools He decreased by 13,000 between 2022 and 2024.

This is torn through the destroyed housing markets in the school, which once witnessed inflated prices against the backdrop of the strong demand for the best public schools.

The incomplete premium is fuel once by reaching elite schools and expectations of high property values. But with the shrinking population and local governments that define the provincial enrollment policies, the added value of these homes began to diminish, according to Lilim Wu, a real estate analyst in Daiwa Capital Markets.

A 7 -year -old mother told CNBC that her apartment price decreased by 20 % more than two years ago when she bought it. This cost her twice the average price of the apartment in the city, so that her son can attend a good elementary school.

The number of children entering the elementary school in 2023 reached the highest level in more than two decades, according to wind information, before decreasing in 2024, the year that her son recorded.

This demographic transformation is an additional overview of the real estate market, which has struggled to appear from a painful contraction since late 2020. Despite a large group of Central and local government measures Since last September, the real estate recession has not shown a few sign of retreat.

The prices of new homes declined at the fastest pace in seven months in May, according to Larry, who is the chief economist in China in Macquari, stretching a period of two years, despite government efforts aimed at arresting the decline.

Ho said that the sales of new homes in 30 main cities decreased by 11 % year on an annual basis in the first half of this month, increasing 3 % in May.

“Investment real estate holders are likely to be pure sellers (for the owners) for the foreseeable future,” due to expectations that home prices will continue to decline, according to Goldman Sachs estimates.

While Goldman expects the high rate of urban expansion in China in the coming years, which damaged the demand for urban housing, Wu said that the demographic clouds in the real estate market were not “imminent” yet, and it may take decades for operation.

In the short term, “some of this decline will be compensated by continuing to urbanize and demand for housing upgrade,” Wu said, as the latter will represent an increasing share of the total demand for housing in China.

Evelyn Cheng from CNBC contributed to this story.