BEIJING: Demand for new homes in China is likely to remain substantially below the market’s 2017 peak over the next few years, Goldman Sachs said late on Monday in a projection suggesting that the world’s second-biggest economy faces a long property slump.
China’s property sector, which accounted for roughly a quarter of economic activity at its peak, entered a prolonged slump in 2021, with market sentiment hammered by the struggles of debt-laden developers trying to deliver homes for which buyers had already paid.
Demand for new homes is likely to be less than 5 million units per year, significantly below the 2017 peak of 20 million units, the investment bank said.
New home prices fell in May, extending a two-year stagnation, official data showed on Monday, highlighting sectoral challenges despite several rounds of economic policy support measures.
“Our earlier estimates did not account for the fact that investment demand in China could turn negative as owners sell vacant apartments, and that the 2015-18 government-led shanty town redevelopment should result in fewer demolitions in subsequent years,” Goldman Sachs said.
“Holders of investment properties are likely to be net sellers (to owner-occupiers) for the foreseeable future.”
With the government’s focus shifting towards urban renewal and rehabilitation rather than demolition, average demand for homes due to demolition will decline from 4.7 million units in the 2010s to 2.7 million units in the 2020s, the bank added.
