China's housing market is undergoing four major changes. Learning Times: Significant changes in supply and demand. Real estate | market | China

On July 24th, the Central Political Bureau held a meeting to analyze and study the current economic situation and economic work, proposing to adapt to the new situation of significant changes in the supply and demand relationship of China's real estate market, adjust and optimize real estate policies in a timely manner, implement policies tailored to the city, make good use of policy toolboxes, better meet the rigid and improved housing needs of residents, and promote the stable and healthy development of the real estate market. At present, the supply and demand relationship and urbanization pattern in China's real estate market are undergoing profound changes. Accurately grasping their major trends and structural changes is an important basis for scientific research and formulation of macroeconomic policies. It is of great value for improving the long-term institutional mechanism of the real estate market and promoting the smooth transition of the real estate industry to a new development model.

At present, China's urbanization development has entered a stage of transformation and improvement in the middle and later stages, gradually shifting from outward expansion to inward high-quality development. A coordinated development pattern of large, medium, and small cities based on urban agglomerations and metropolitan areas is being formed. In this context, the supply and demand relationship in China's real estate market is also undergoing profound changes. The contradiction in urban housing has shifted from the overall dimension to structural problems. The development model of "high debt, high leverage, and high turnover" in the real estate industry for many years is no longer sustainable. The real estate market is achieving self repair and transformation and upgrading towards stable prices, optimal structure, and high quality.

Urbanization has entered the middle and later stages of improving development, and the growth rate of urban inflow has slowed down. The housing market has shifted from a relative shortage of supply to a dynamic balance between supply and demand. From the experience of developed countries, the urbanization process shows an "S" shape, and as the urbanization rate approaches the turning point of 70%, the growth rate will slow down. According to data from the National Bureau of Statistics, the urbanization rate of China's permanent population reached 65.22% in 2022, gradually approaching a turning point. It is foreseeable that China's urbanization pace will enter a deceleration stage. From the perspective of population changes, in 2022, China's population experienced negative growth for the first time, with the total fertility rate falling below 1.1. The net inflow of population into hot cities slowed down, while the net outflow of population from non hot cities increased. Therefore, the population support for urban housing demand is facing weakening. Usually, the number of per capita housing units is an important indicator to measure whether the housing supply is sufficient. When the per capita housing is greater than one unit, it can be considered that the total housing supply is sufficient. The seventh national population census data shows that in 2020, the per capita housing construction area of urban households in China reached 36.52 square meters, an increase of 7.4 square meters in 10 years. More than 60 million units of various types of affordable housing have been built in total. This indicates that China's urban housing market has moved from an incremental era to a stock era, and housing supply has moved from large-scale construction and high turnover to a new stage of high-quality and sustainable development.

The new urbanization centered on people has been solidly promoted, and the people's yearning for a better life has accelerated. The demand for housing has shifted from "housing for living" to "livable for living". The new urbanization centered on people is based on the well-being of the people, focusing on improving the sense of gain, happiness, and security of residents' lives. The real estate market, which is transitioning from an incremental era to a stock era, is accompanied by a transition in the housing demand of urban residents from "having" to "not being good". The development goal has gradually upgraded from "living for living" to "having livable and secure housing". From the perspective of housing demand structure, there is great potential for improving demand, which has become an important support for the housing demand side. The demand for improvement is not only reflected in the increase in per capita living area of urban households, but also in the comprehensive improvement of living quality. The people's demand for a better quality of living is not only reflected in more spacious living spaces, but also in the desire for complete living facilities, high-quality property services, appropriate commuting distance, and good community governance. From good houses to good neighborhoods, from good neighborhoods to good communities, from good communities to good urban areas, there is a great demand for improved housing in urban areas of China. From the perspective of population structure, the upward shift in China's population age structure has driven the gradual release of demand for improvement. In recent years, the aging population in China has gradually intensified, and the age concentration range has gradually increased from 30-45 years old to 40-60 years old. This age group has good economic conditions, strong purchasing ability, and is in line with the normal cycle of replacement living conditions. The demand for improvement in the market is gradually increasing. In the long run, with the subsequent increase in per capita GDP, per capita disposable income, per capita housing area, and changes in population structure in China, the demand for improvement may gradually become an important component or even a dominant part of the demand.

The flow of population between cities is becoming more free and frequent, and the differentiation of regional population growth and decline is becoming increasingly prominent. Housing prices are shifting from generally hot to overall stable and locally cold. In the long run, regional differentiation is a sustainable feature of the future real estate market. The era of large-scale development with generally rising housing prices has basically come to an end, and the pattern of differentiation in the real estate market between cities is further emerging. This is mainly due to the agglomeration effect of urban development. The population is concentrated in big cities, providing people with more opportunities for communication and innovation, more employment choices, more diverse consumer choices, and more efficient and high-quality medical and educational services. From the perspective of population changes, China's current population development is showing a trend of fewer children, aging, and regional population differentiation. First and second tier big cities continue to attract population, although the fertility rate in these areas is very low, relying on foreign population can continue to maintain population growth. On the contrary, the population of small cities and county towns is still losing, and the real estate market has entered a new round of structural differentiation. At the same time, under the strong intervention of policies aimed at stabilizing land prices, housing prices, and expectations over the years, the regulatory effect of "implementing policies tailored to the city" is gradually emerging, and the financial attributes of housing are being reversed, achieving a shift towards the residential attribute of "housing for living, not for speculation". In addition, the three-year continuous impact of the epidemic has had varying degrees of impact on the regional housing market, which is facing three major pressures: supply shock, weakening expectations, and shrinking demand. The speculative demand for housing in big cities has been curbed, while the weak demand for housing in small and medium-sized cities has further exacerbated the regional differentiation of housing prices.

Urban agglomerations and metropolitan areas have become the main forms of new urbanization, and the linkage effect of regional spatial integration is gradually strengthening. The housing governance system is shifting from a single city to a geographic unit based on urban agglomerations and metropolitan areas. With the continuous improvement of urbanization level, the trend of new urban population gathering in urban agglomerations and metropolitan areas will become more obvious in the future. According to the seventh national population census data, from 2010 to 2020, the population of the Yangtze River Delta and Pearl River Delta urban agglomerations increased by 18.61 million and 23.12 million respectively. Among them, the permanent population of the five major urban agglomerations of the Yangtze River Delta, Pearl River Delta, Beijing Tianjin Hebei, the middle reaches of the Yangtze River, and Chengdu Chongqing accounts for about 42% of the country's total, becoming the main engine of China's economic development. Moreover, urban agglomerations and metropolitan areas have the characteristic of significant population agglomeration in central cities but population outflow from peripheral cities. For counties with a large population base and relatively low urbanization rates, promoting urbanization construction with county towns as important carriers provides favorable opportunities for the development of their housing market. In the context of high-quality promotion of regional coordinated development, it is urgent to build an integrated housing governance system with urban agglomerations and metropolitan areas as units. From the perspective of housing security, the comprehensive coordination of housing development planning with population mobility, industrial layout, urban functions, infrastructure, etc., and the construction of a multi-level urban agglomeration housing security system, central cities with more employment opportunities are the primary choice for young people. However, the new construction land in big cities is limited, and it is necessary to increase the supply of housing through a sound rental market, especially for small units and low rent rental housing. At the same time, it is necessary to reasonably determine the land supply of different cities in urban agglomerations, and allow for cross regional adjustment of surplus indicators linked to the increase or decrease of urban and rural construction land within urban agglomerations and metropolitan areas. From the perspective of public services, it is necessary to take integration as the guide, coordinate and promote the equal development of education, medical care, elderly care, social security, and other areas, and continuously improve the level of co construction and sharing. At the same time, fully leverage the role of the market in the allocation of regional public services, and encourage social capital to participate in the construction and operation of public services in urban agglomerations and metropolitan areas. From the perspective of real estate market regulation, the integrated development of urban agglomerations and metropolitan areas has gradually strengthened the linkage foundation of the real estate market, and the regulation of the real estate market in core cities will have a demonstration effect on surrounding cities. It is necessary to strengthen collaboration and precision, formulate real estate regulation policies as a whole based on urban agglomerations, and incorporate the transmission mechanism of regulation policies into it, enhance the resilience of the real estate market development, and promote the stable and healthy development of the real estate market.