China faces a significant housing market crisis driven by population decline and reduced housing demand. The impacts of this situation are becoming increasingly evident.
Demographic Problems and Housing Market
The crisis in China's housing market is not new, having begun in late 2020. According to Goldman Sachs, demand for new homes in urban areas has dropped to under 5 million units per year, down from 20 million in 2017. The situation is worsened by declining population numbers, which undermine housing demand. Bank economists noted that 'falling population and slowing urbanization suggest decreasing demographic demand for housing.'
Consequences for the Education Sector
The decline in population is reflected in China's educational system. Nearly 36,000 kindergartens have shut down across the country in the past two years, resulting in a loss of over 10 million preschool students. The number of elementary schools has also decreased by almost 13,000 from 2022 to 2024. Changes in student enrollment lead to a reduced demand for housing in areas known for their good schools. As a result, premiums for homes near top educational institutions are gradually evaporating.
Price Declines and Sales Reductions
The real estate market continues to face challenges. New home prices dropped in May at the fastest pace in seven months, while home sales fell by 11% year-on-year. Despite measures taken by the government, the decline persists. Goldman Sachs predicts that population contraction will have lasting effects on the housing market for decades.
The crisis in China's housing market is exacerbated by demographic changes, leading to price declines and reduced demand. Future market prospects remain uncertain due to the ongoing population decline and low birth rates.
