China’s Real Estate Market Continues to Sputter

Published on Author Christian von Hassell

Once characterized by the prolonged appreciation of house prices, China’s real estate market has stumbled over the past year. According to recent data, it does not seem to be recovering yet. In January,  new-home prices rose in only 1 city out of 70 cities tracked by the Chinese government.

I wonder what effect this post-bubble market will have on domestic migration. Barring other factors like government restrictions, cheaper home prices certainly seem likely to spur further rural-urban migration.  Of course, slowing growth – the main prick of the recent bubble – lingers on the other side.

The linked article does not mention it, but – from what I have read – the real estate bubble has been most egregious in China’s largest cities (pop >7million). I wonder then what the migratory environment is looking like between the largest cities and those that would seem small only in comparison to Beijing, etc.

4 Responses to China’s Real Estate Market Continues to Sputter

  1. Good for thinking about the implications for migration. A key component is how much of the housing actually appears on the market for rent or residence, as opposed to being held empty as a (very speculative!) investment. In the latter case, will units be forced into actual use? Even if such real estate is not made directly available to migrants, the net effect should be greater supply and lower prices, as people move from further out to newer, more convenient houses and condos, freeing up their now distant homes for occupancy. Again, that’s ceteris paribus because the arrival of new migrants can offset that. For the moment, however, I’ve heard nothing suggesting that this supply effect is significant. In contrast, what I see are photos of vacant buildings and tails of investors who own multiple unoccupied apartments (which means they don’t yet have anything hooked up to plumbing and so are not immediately ready for occupancy).

  2. Of course cheaper housing prices would seem to provide further incentive for rural-urban migration. You mentioned “slower growth lingering on the other side.” Although nearly every media article regarding China seems to harp on this, I fail to see how a third of a percentage decrease in GDP growth would have that large of an effect on one of the fastest growing economies in the world.

  3. With a declining real estate market in China, we are seeing more Chinese real estate investors moving their scope to United States markets such as New York. Several sky scraper construction projects in NYC are being funded by Chinese investors. They view an investment in NYC to be safer than an investment in China considering recent trends and it allows the investors to diversify their portfolio.