China’s housing market faces long-term decline

China’s demand for new urban homes is expected to remain significantly lower than its 2017 high, according to Goldman Sachs. The bank predicts that yearly demand in cities will hover around 5 million units in the coming years, a sharp 75% drop from the 20 million units seen at its peak. This decline is largely due to a shrinking population and slower urban growth, which are reducing the need for new housing.

Goldman Sachs analysts also point to falling home prices as a key factor discouraging buyers. Many expect prices to keep dropping, making people hesitant to invest in property. Despite recent government efforts, like lower mortgage rates and relaxed buying rules in some cities, the housing market remains weak. These measures have not been enough to spark a strong recovery.

The property sector, once a major driver of China’s economy, is struggling. New home prices fell by 0.22% in May compared to April, marking the steepest drop in seven months. Sales and real estate investments are also declining, with no quick fix in sight. Experts from UBS suggest the downturn may continue into 2025, though the pace of decline could slow.

China’s government is trying to support the market by tapping into a $1.5 trillion fund to help with housing costs. However, with ongoing challenges like deflation and trade tensions with the US, rebuilding confidence in the property sector remains tough. The outlook for China’s housing market suggests a long road ahead before stability returns.