Understanding Residential Real Estate in China

Abstract

China's residential real estate sector plays an important role in the economy and has been a key driver of growth. Since 2014 the sector has softened visibly, reflecting overbuilding across many cities. An orderly adjustment of the sector is welcome. The key questions are how severe the adjustment will be and how long it will last. This paper uses various datasets, an analytical framework to estimate demand and supply conditions, and develops a number of scenarios to determine the oversupply both at the national level and by city tiers. It highlights that the adjustment will be a multiyear process with adverse implications for investment and growth. Smaller cities, as well as those in the Northeast region, face more challenging demand-supply dynamics. The key will be to allow the adjustment to take place, while avoiding a too sharp of an economic slowdown.

China's Urban Speed Machine: The Politics of Speed and Time in a Period of Rapid Urban Growth

“…Central government's attempts to set stricter terms on mortgage finance are routinely ignored by city‐level governments. Local‐level emphasis on pushing the property sector has been instrumental in driving the real estate sector's share of national GDP from roughly 5% to 15% between 2004 and 2014 (Chivakul et al ., ).…”

“…Central government's attempts to set stricter terms on mortgage finance are routinely ignored by city-level governments. Local-level emphasis on pushing the property sector has been instrumental in driving the real estate sector's share of national GDP from roughly 5% to 15% between 2004 and 2014 (Chivakul et al, 2015). Paradoxically, local-state dominance over the banking sector has spurred the growth of 'informal finance', which maintains looser lending criteria, high interest rates and rapid repayment demands.…”

“…The loss of arable land and its replacement with under-utilized spaces amounts to an accumulation of 'wasted cities' (He et al, 2016), so called due to the over-usage of land, water, energy and concrete. In addition, as recent studies have shown, city administrations' fixation on property development to achieve speedy growth has produced a number of severe distortions in real estate markets (see Chivakul et al, 2015;Wu et al, 2015). In some lower-tier cities, land and housing bonanzas have produced severe oversupply, as cities rushed to build in anticipation of growth that has in many cases failed to materialize.…”

Simulating the Impact of Economic and Environmental Strategies on Future Urban Growth Scenarios in Ningbo, China

“…The Slow-and Eco-scenarios were defined under the assumption that urban growth in the region will slow down in the next 25 years, given the booming building construction in China and some clear signals indicating that the rate of urban growth will slow down [4]. Considering the increasing tight regulation on the property market as well as the strong call for ecosystem protection, we assumed that the maximum allowable area of urban growth for the next 25 years will be limited to one-third of that during the 1990-2015 interval, i.e., about 650 km 2 .…”

“…In 2014, there were 88 municipalities and prefecture-level cities each with more than 5 million people, nearly 40% of which were located in coastal areas [3]. Many cities are increasing uncontrollably in size in terms of both their non-agricultural population and the size of the built-up areas [4]. This is largely driven by the growing demand for higher living standards, higher incomes and better-living conditions [5].…”