China's housing demand set to decline to 800m Sq M annually by 2040: Fitch

May 20, 2024 (MLN): China’s new housing demand may drop to around 800 million sq m per year on average over 2024-2040 amid adverse demographic shifts, slower urbanisation, and diminishing numbers and size of urban renewal projects, says Fitch Ratings in a new report.

The agency’s projection suggests a 33% decline from the actual average demand of 1.2 billion sq m per year for 2011-2020 based on official statistics and is also lower than our near-term forecast of 850 million-900 million sq m in 2024.

Fitch further expects, in the long run, 600 million sq m of annual demand may be fulfilled by new private housing, with the remaining demand met by public rental housing and existing housing stocks.

This is below the 948 million sq m of new private homes sold in 2023, indicating sector consolidation may continue in the medium term.

That said, local governments may acquire private homes from developers and convert them into rental housing, cushioning the sales decline in the near future.

Fitch’s forecast considers fundamental housing demand including purchases for self-use and rentals.

It acknowledges the difficulties in predicting investment-driven housing demand, which will be affected by economic cycles and policy changes that help broaden households’ saving options.

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