China's demand for new homes is projected to remain nearly 75% below its 2017 peak over the coming years, according to a new forecast from Goldman Sachs, underscoring deepening structural challenges in the country's property market. The investment bank cited a combination of demographic shifts, weakening investor sentiment, and a pivot in government policy as reasons for the prolonged downturn.
"Falling population and slowing urbanisation suggest decreasing demographic demand for housing," analysts at Goldman Sachs wrote in a report released Monday. They estimated that annual demand for new urban residential properties will remain slightly below five million units-well beneath the 2017 high of 20 million.
China's real estate sector, which once accounted for about a quarter of the country's economic activity, has struggled since 2021 amid a liquidity crisis among highly indebted developers. Developers have faced mounting difficulties delivering pre-sold homes, undermining consumer confidence and leading to a sustained market slump.
The latest official data showed that new home prices declined again in May, marking the sharpest drop in seven months and extending a two-year trend of price stagnation despite several rounds of stimulus. Goldman Sachs noted that the effect of the government's September 2023 stimulus push appears to be fading.
Goldman economists Andrew Tilton and Hui Shan forecast that annual demographic demand in China's urban areas will fall to an average of 4.1 million units between 2025 and 2030, down from 9.4 million units per year in the 2010s. "Our earlier estimates did not account for the fact that investment demand in China could turn negative as owners sell vacant apartments," the analysts said.
Investor appetite is deteriorating alongside declining price expectations. "Holders of investment properties are likely to be net sellers (to owner-occupiers) for the foreseeable future," Goldman's report stated.
Government-led urban policy is also shifting. The firm said the state's focus has moved from widespread demolition to urban rehabilitation, reducing the need for replacement housing. Average demand from demolitions is expected to drop from 4.7 million units in the 2010s to 2.7 million in the 2020s.
