Real Estate

China’s housing demand set to drop as the population ages, real estate broker predicts

Chinese property broker Beike expects housing demand to decline domestically over the next decade. Pictured here on June 28, 2022, is a new commercial residential complex in Nanning, Guangxi Zhuang Autonomous Region, China.
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BEIJING — China’s massive residential real estate market is only going to see demand drop over the next 15 years, sales and rental giant Beike predicts.

New demand for housing by floorspace is set to drop by 2.5% a year between 2021 and 2035, the company’s research arm said in a report shared with CNBC. Beike owns and operates Lianjia, one of China’s largest housing brokerages.

The primary reason for the decline is China’s aging population, according to the report.

China’s population dependency support ratio — which compares the age 15 to 64 working population with the sum of those younger or older than that age range — peaked in 2010, Beike’s report said.

Three or four years after Japan and Korea reached a similar peak, their housing demand declined, the authors said.

Real estate overall and related industries account for more than a quarter of China’s economy, according to Moody’s. The bulk of household wealth is tied up in real estate. In the last few years, Beijing has tried to limit developers’ high use of debt and buyer speculation.

Still a giant market

However, Beike does expect transaction value to grow slightly, by 1.8% on average a year through 2035, bringing annual value to 29.2 trillion yuan ($4.36 trillion) by that time.

Even with declining floorspace demand, the level in year 2035 will still remain a large 1.33 billion square meters (14.32 billion square feet), the report predicted.

For comparison, about 2.2 billion square feet in new single-family homes was completed in the U.S. last year, according to the U.S. Census Bureau.

Much of China’s new housing demand in coming years will likely be met by remodeling or reconstruction of existing properties, rather than new developments, Beike said in its report.

Housing demand will also vary by region, with more people interested in moving to major metropolitan areas such as those around Shanghai, Beijing and Shenzhen, said Tang Xuan, senior analyst at Beike’s research institute.