QINGZHOU, CHINA – JUNE 16, 2025 – Citizens are viewing sand table at the sales office of a commercial residential property development in Qingzhou City, Shandong Province, China on June 16, 2025.
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China’s real estate sector has grappled with a deepening downturn for years. Now a shrinking population is casting another shadow over the stagnant property market.
Goldman Sachs estimates that demand for new homes in Chinese urban cities will remain suppressed at under 5 million units per year in the coming years — one fourth of the peak of 20 million units in 2017.
“Falling population and slowing urbanization suggest decreasing demographic demand for housing” in the coming years, Goldman Sachs economists said in a note Monday.
The country’s population is estimated to fall to below 1.39 billion by 2035 from 1.41 billion, according to World Bank’s latest data, said Tianchen Xu, senior economist at Economist Intelligence Unit, citing a combination of fewer newborns and more deaths from an ageing population.
China’s population has been declining for the past three years, with the latest government data for 2024 showing it fell by 1.39 million from the prior year, as birth rates drop.
Shrinking population will cripple home demand by 0.5 million units every year in the 2020s and a lead to a bigger dent of 1.4 million units annually in the 2030s, Goldman Sachs estimates, compared to the positive contribution of 1.5 million units in the 2010s when population was on a steady rise.
Fertility rate in the country has continued to fall even after Beijing relaxed its one-child policy in 2016, and despite Beijing’s efforts to incentivize child-bearing via cash incentives. Stagnant incomes, instability over job prospects and a poor social security system have dissuaded Chinese young people from having more babies.
Beijing’s pronatalist policies will likely have “limited effect” as they do not address the deep-rooted issues, Xu said, such as high economic costs for child-bearing and people’s tendency to postpone marriage for career progression and “an embrace of individuality.”
Underscoring the declining birth rates, nearly 36,000 kindergartens across the country closed down over the past two years, with the number of students in preschools falling by over 10 million. That’s according to CNBC’s calculation of the official data released the Ministry of Education. Similarly, the number of elementary schools dropped by nearly 13,000 between 2022 and 2024.
That is rippling through school-adjacent housing markets that once saw inflated prices on the back of strong demand for better public schools.
The once-sizable premium was fueled by access to elite schools and expectations of rising property values. But with a shrinking population and local governments scaling back district-based enrollment policies, the added value of these homes has started diminishing, according to William Wu, China property analyst at Daiwa Capital Markets.
A mother of a 7-year-old boy in Beijing told CNBC that the price of her apartment had fallen by about 20% from over two years ago when she bought it. It cost her roughly twice the average price for an apartment in the city, so that her son could attend a good elementary school.
The number of children entering primary school in 2023 reached the highest level in over two decades, according to Wind Information, before dropping in 2024, the year her son enrolled.
Steeper slump
That demographic shift is an additional overhang to the property market, which has struggled to emerge from a painful downturn since late 2020. Despite a raft of central and local government measures since last September, the real estate slump has shown little sign of abating.
New home prices fell at their fastest pace in seven months in May, according to Larry Hu, chief China economist at Macquarie, extending a two-year stagnation, despite the government efforts aimed at arresting the decline.
New home sales in 30 major cities fell by 11% year on year in the first half of this month, worsening from the 3% drop in May, Hu said.
“Holders of investment properties are likely to be net sellers (to owner-occupiers) for the foreseeable future,” over expectations that home prices will continue to fall, Goldman Sachs estimates.
While Goldman expects the rise in China’s urbanization rate to temper in the coming years, hurting urban housing demand, Wu said demographic drag on the property market was not yet “imminent” and may take decades to play out.
In the nearer term, “some of this decline will be offset by continued urbanization, and housing upgrade demand,” Wu said, as the latter would account for an increasing share of China’s total housing demand.
— CNBC’s Evelyn Cheng contributed to this story.
