China’s property industry will face a new and intractable problem in the coming decade: there are not enough new buyers. Detailed population data from provincial statistical authorities reveals declining populations in some provinces, and meaningful correlations between housing prices and population growth. This is important for China’s future construction growth, since activity in smaller cities drives overall raw materials demand.
New construction nationwide is currently proceeding at over three times the pace of forward-looking urban household formation. Moreover, there is no obvious solution to these imbalances besides a slowdown in construction and lower property prices, affecting an industry that represents a quarter or more of China’s entire economy.
