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China’s new housing demand to drop by 50% in the next decade


Pictured here is a real estate project under construction in Huai’an, China, on Jan. 21, 2024.

Nurphoto | Nurphoto | Getty Images

BEIJING — Demand for new housing in China is set to drop by around 50% over the next decade, making it harder for Beijing to quickly bolster the country’s overall growth.

That’s according to the International Monetary Fund’s latest staff report on China, completed in late December and released Friday.

The IMF said it expects “fundamental demand for new housing” in China to fall 35% to 55% due to a decline in new urban households and a large inventory of unfinished or vacant properties.

Slowing demand for new housing will make it more difficult to absorb excess inventory, “prolonging the adjustment into the medium term and weighing on growth,” the report said.

China’s real estate sector and related industries have accounted for about a quarter of the country’s gross domestic product. The latest property market slump follows Beijing’s crackdown in 2020 on developers’ high reliance on debt for growth.

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The prediction for a roughly 50% drop in new housing “overestimates the possible market downturn,” Zhengxin Zhang, China’s representative to the IMF, said in a Jan. 10 statement included in the organization’s report released Friday.

Zhang said China’s housing demand would remain large, and policy support would gradually kick in.

“Therefore, a significant decline in housing demand is very unlikely to happen,” he said. “The rationality of the base period selected is also debatable.”

The IMF report compared housing demand and new starts from the 2012 to 2021 period with estimates for 2024 to 2033.

China’s real estate sector grew rapidly over the last few decades, prompting authorities to warn against betting on a price surge and emphasize that “houses are for living in, not for speculation.”

The IMF pointed out that in the 2010s, residential investment’s share of GDP in China was near or above the peak levels of property booms in other countries in the past.

“The large correction in the property market, following government efforts to contain leverage in 2020-21, was warranted and needs to continue,” the IMF report said.

The last three years have also seen highly indebted developers from Evergrande to Country Garden default on U.S. dollar-denominated debt held by overseas investors. This week, a Hong Kong court ordered Evergrande to liquidate.

Since late 2022, Chinese authorities have taken steps to ease financing restrictions for developers and new homebuyers. However, central and local government efforts to support real estate have not yet significantly stalled a broader decline in the sector.

“It’s important for the central government to come in with increased financing to complete the uncompleted presold housing,” Sonali Jain-Chandra, mission chief for China, Asia and Pacific department, IMF, told reporters Friday.

“This has been another factor holding back confidence in the market,” she said.

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