China’s Housing Market Faces New Challenges Amid Population Decline
The Chinese property sector, already wrestling with a prolonged downturn, is now confronting fresh hurdles as the country's population continues to shrink. The demographic shift is expected to exert a lasting impact on housing demand, compounding the challenges of stagnant incomes and an oversupply of unsold homes.
Urban Home Demand Plummeting
Recent projections indicate that new home demand in Chinese cities will hold steady at under 5 million units per year for the foreseeable future—just a fraction of the peak of 20 million units recorded in 2017. Experts warn that a declining population coupled with slower urbanization will significantly reduce the need for new housing.
By 2035, China’s population is forecast to dip below 1.39 billion due to a combination of lower birth rates and an aging population. This demographic trend could reduce annual home demand by 0.5 million units in the 2020s and accelerate to a loss of 1.4 million units each year in the 2030s. This is a stark contrast to the 2010s, when population growth contributed positively to housing demand.
Why Birth Rates Are Not Bouncing Back
Despite Beijing’s relaxation of the one-child policy and incentives encouraging families to have more children, the birth rate remains low. Economic uncertainties, stagnant wages, career pressures, and the high costs of raising children have discouraged many young couples from expanding their families. The government’s pronatalist approach has so far failed to tackle these deep-rooted social and financial issues.
The repercussions are visible across the education sector as well. Over the past two years, nearly 36,000 kindergartens have shuttered nationwide, with preschool enrollment dropping by more than 10 million students. Similarly, the number of primary schools fell by nearly 13,000 between 2022 and 2024.
Housing Markets Near Schools Feel the Blow
This demographic downturn is reshaping housing markets, especially in neighborhoods near sought-after schools—once hotbeds for property premiums. The allure of elite public schooling, which previously boosted property values, has faded as birth rates decline and local policies around school enrollment relax.
One Beijing homeowner shared that the value of her apartment, purchased at roughly twice the city’s average price to secure a spot in a reputable elementary school, has dropped by about 20% over the last two years. The number of children enrolling in primary schools peaked in 2023 but quickly declined the following year, echoing broader demographic shifts.
Real Estate Slump Shows No Sign of Easing
The property market slump, which began in late 2020, continues to weigh heavily on prices and sales despite multiple government interventions. May saw new home prices drop at their sharpest rate in seven months, marking the extension of a two-year stagnation trend. Sales in 30 major cities witnessed an accelerated decline, falling by 11% year-over-year in the first half of June, worsening from a 3% drop recorded in May.
Market analysts suggest that many property investors are now shifting to selling rather than buying, anticipating further price declines. Yet, some experts believe the demographic drag on housing demand won’t be immediate but could unfold over several decades.
Hope on the Horizon: Urbanization and Upgrades
In the shorter term, ongoing urbanization and the trend toward housing upgrades are expected to cushion the blow. As China’s urban residents seek better living conditions, this demand segment may partially offset the demographic pressures restraining the market.
Nonetheless, with fundamental population shifts underway, the Chinese real estate sector faces a complex future, navigating a mix of economic, social, and demographic headwinds.
