China housing demand to stay at 75% below peak, Goldman says
The gloomy forecast by the US investment bank is casting another shadow over the future of the world’s second-largest economy’s stagnant property industry
[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.
“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 remain 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 following years of oversupply.
China’s new-home prices fell the most in seven months in May, official data showed on Monday (Jun 16), suggesting the effects 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 Andrew Tilton and 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 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.
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