QINGZHOU, CHINA – JUNE 16, 2025 – Citizens are viewing a sand table at the sales office of a commercial residential property development in Qingzhou City, Shandong Province, China on June 16, 2025.
Cfoto | Future Publishing | Getty Images
China’s real estate market is suffering under the weight of compounding failures. Years of government intervention have left the sector stagnant and now, as population declines loom over the horizon, the situation has worsened. This is not merely a market correction; it is a consequence of government policies that stifle personal responsibility and compromise the free market.
According to Goldman Sachs, demand for new homes in urban centers is projected to plummet to under 5 million units yearly—just a quarter of the peak demand of 20 million units seen in 2017. This erosion of housing demand is a stark indictment of a government that fails its citizens by imposing economic policies that do not foster growth or prosperity.
Undermining the economy, a dwindling population will further constrict home demands by an estimated 0.5 million units annually in the 2020s, spiraling into a staggering 1.4 million fewer units each year in the 2030s, as projected by Goldman Sachs. This is no accident; a combination of declining birth rates and an overly ambitious social engineering agenda crafted by the state has come to fruition.
The fertility rate continues to slide dangerously despite Beijing’s attempts, dating back to the relaxing of the one-child policy in 2016, to incentivize families to have children. With stagnant wages, employment uncertainty, and a woeful social safety net, the government has alienated young people who see little incentive in bearing the weight of raising a family.
Beijing’s so-called pronatalist policies appear unlikely to reverse these trends, as they sidestep urgent issues, such as the exorbitant economic burdens that accompany child-rearing, while simultaneously promoting a culture that values career advancement over familial commitments.
The implications of this demographic shift ripple through the educational landscape. Recent reports indicate that nearly 36,000 kindergartens across China have shut down in the past two years, with a corresponding decrease of over 10 million students in preschools. This trend shows a direct impact on the housing market, once buoyed by parents seeking proximity to reputable schools.
Access to quality education once elevated property values, but with a reduced population and local governments dialing back on enrollment policies, the allure of upscale neighborhoods has begun to fade. A mother in Beijing reported a staggering 20% drop in her apartment’s value, purchased at a premium to guarantee her child’s spot in a quality elementary school.
At a time when one might expect burgeoning enrolments, the number of children entering primary school in 2023 reached a high not seen in over two decades, only to collapse the following year. This troubling cycle of decline is further evidence of an economy working at cross-purposes with the needs of its citizens.
Steeper slump
This demographic decline acts as a burdensome weight on a property market that has yet to recover from its painful downturn beginning in late 2020. Despite an array of government interventions aimed at propping up the sector, the real estate malaise shows little sign of abating.
New home prices fell at their quickest rate in seven months this past May, extending a phase of stagnation that belies the government’s frantic efforts to restore balance. According to experts, the sales of new homes in 30 major cities plummeted by 11% year-on-year in the first half of this month, exacerbating the already troubling 3% decline seen in May.
Investment property holders will likely be compelled to sell to owner-occupiers in expectation of further falling prices, as forecasts from Goldman Sachs suggest a persistent decline. Meanwhile, the anticipated rise in China’s urbanization rate is a double-edged sword, affording fleeting alleviation of housing demand while simultaneously demonstrating the limitations of government solutions.
Though urbanization may offer some short-term relief through housing upgrades, the root issues of government overreach remain unaddressed, and ordinary citizens continue to bear the burden. The principles of personal responsibility and free-market access must be championed to break free from this cycle of decline.
— CNBC’s Evelyn Cheng contributed to this story.
