Once the main channel of wealth accumulation for China’s middle class, real estate is now losing its appeal to the younger generation.
The population is old, houses are difficult to sell
32 years old and currently a lawyer in Guangzhou City, Patrick Lu is not interested in housing investment. Different from his parents when they own several two bedroom apartments in the city.
Patrick Lu said that most Chinese people born between the 1960s and 1980s spent most of their income on real estate investment. But the younger generation no longer thinks like that. The property left by parents will not be as valuable as it used to be, especially in small cities. The truth is that fewer and fewer young people are buying houses.
According to Joseph Chamie, demographer and former Director of the United Nations Population Division, an aging population combined with population decline will have negative consequences for the housing market.
China’s population growth began to slow in 2016 and the total population fell by 850,000 last year, to 1.4118 billion. This is the first decrease in 60 years.
China’s population is forecast to fall to 1.313 billion by 2050 and to less than 800 million by 2100. The working-age population, aged 15 to 64, stood at 882.22 million last year, but This total is expected to more than halve by the end of the century.
The number of young Chinese, aged 25 to 39, is forecast to decrease from 325 million to 220 million by 2050.
“In just 27 years, the group of first-time homebuyers will shrink by a third,” said George Magnus, a research associate on China at the University of Oxford.
According to demographer Joseph Chamie, Chinese people marrying and having children at a young age are declining, along with an aging population. The real estate sector that used to be “hot” may be “cold”.
Li Feng, 37, who lives with her 75-year-old mother in the western city of Suzhou, has made it a priority to sell one of the two apartments she owns this year.
She said that after her mother died, she would live alone. With about $265,000 expected from home sales, she will spend most of it on savings, small apartment renovations and travel each year.
Young people are not interested in real estate investment
Demographer Joseph Chamie said that although China’s real estate market is shrinking, it would be positive if household incomes improve over time so that people can afford to upgrade their housing space. However, there is no indication that this is happening.
Zheng Xiao, a 22-year-old university student in Shenzhen, said his parents had just sold a 360-square-foot piece of land for 18 million yuan in the city.
“It took my parents a few months to finally close the deal for a much lower price than they expected. Young homebuyers don’t seem to be interested in big houses because they will face pressure to pay loans and high taxes,” said Zheng Xiao.
Zheng Xiao said that today’s “Gen Z” generation wants to achieve a work-life balance rather than accumulating wealth.
Mr. George Magnus expects the Chinese property market to recover somewhat in 2023 after the volume of transactions dropped last year.
“Perhaps in the future we will see a lot of foreign workers in China’s service market. A similar situation has played out in Japan, because of its aging population.
Meanwhile, much of the money the Chinese have invested in housing may not be recovered. Many homes will become sunk costs, abandoned in places where there are fewer and fewer young people, ”said George Magnus.
Huong Quynh (Translate)