China housing demand to stay at 75% below 2017 peak, Goldman says
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The gloomy forecast casts another shadow over the future of China’s stagnant property industry.
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BEIJING – China’s demand for new homes in cities is expected to stay at 75 per cent below its 2017 peak in the coming years due to a shrinking population and expectations of price declines that have been hurting investment interest, according to Goldman Sachs Group.
“Falling population and slowing urbanisation suggest decreasing demographic demand for housing,” Goldman Sachs analysts wrote in a report. “Investment demand in China could turn negative as owners sell vacant apartments.”
As a result, China’s annual urban demand for new residential properties will likely stay slightly below five million units over the next few years, substantially below a peak of 20 million units in 2017, they said. The gloomy forecast by the US investment bank is casting another shadow over the future of China’s stagnant property industry, which has been struggling under a mountain of debts after years of oversupply.
China’s new home prices fell the most in seven months in May, official data showed on June 16, suggesting the effect of a stimulus blitz last September is wearing off.
Senior government officials are renewing pledges to revive a sector that at its peak accounted for nearly one-fifth of the world’s second-largest economy.
Citing their own calculation, Goldman economists including Mr Andrew Tilton and Dr Hui Shan said annual demographic demand in urban China will roughly be halved within a decade, falling to an average of 4.1 million housing units a year in the period from 2025 to 2030 from 9.4 million units a year in the 2010s.
With house price expectations falling, holders of investment properties are likely to be net sellers for the foreseeable future, the report said. BLOOMBERG
