China's Population Decline: Impacts on the Property Market

In recent years, China's property market has faced profound challenges, exacerbated by a declining population. According to a report published by Goldman Sachs on June 21, 2025, the demand for new homes in urban areas is projected to remain below five million units annually throughout the 2020s, a stark contrast to the peak demand of approximately 20 million units in 2017. This demographic shift poses significant implications for the real estate sector, which is already grappling with economic stagnation and an oversupply of unsold homes.

The World Bank's latest data indicates that China's population is expected to decrease from 1.41 billion in 2023 to below 1.39 billion by 2035, primarily due to declining birth rates and an aging populace. Tianchen Xu, a senior economist at the Economist Intelligence Unit, emphasizes that the falling birth rate, despite government efforts to incentivize larger families, signifies a persistent trend reinforced by economic pressures. "Stagnant incomes and uncertain job prospects have discouraged young people from starting families," Xu remarked.

The consequences of this demographic decline are already evident. The property market, which previously thrived on the back of a growing population, is now facing a projected reduction in home demand by 0.5 million units annually during the 2020s, with estimates suggesting an even steeper decline of 1.4 million units each year in the 2030s. This marks a significant reversal from the positive contribution of 1.5 million units annually witnessed during the 2010s when population growth was robust.

The educational sector reflects similar trends. Recent calculations by CNBC highlight that nearly 36,000 kindergartens have closed across China within the last two years, leading to a decrease of over 10 million students in preschools. Correspondingly, the number of elementary schools declined by nearly 13,000 from 2022 to 2024. This reduction in student enrollment is impacting housing markets adjacent to popular schools, previously characterized by inflated property prices due to strong demand.

William Wu, a property analyst at Daiwa Capital Markets, explains that the diminishing birth rates have led to a decline in demand for homes in districts known for their educational prestige. "The added value of homes near elite schools is diminishing as local governments reassess district enrollment policies, further pressuring property values," Wu stated.

The overall property market in China has encountered a protracted downturn since late 2020, characterized by falling home prices and reduced new home sales. According to Larry Hu, chief China economist at Macquarie, new home prices fell at their fastest rate in seven months in May 2025, with new home sales in 30 major cities dropping by 11% year-on-year in June. This trend indicates that confidence among homebuyers and investors remains low, prompting many property holders to consider selling their investments rather than waiting for market recovery.

Despite the grim outlook, some analysts, including Wu, argue that the demographic decline's impact on housing demand may not be immediate. "While the urbanization rate is expected to temper in the coming years, the demand for housing upgrades could offset some of the declines in the near term," he noted. As urbanization continues, it may still contribute to housing demand, albeit at a diminished pace.

In conclusion, the interplay of demographic shifts and economic factors presents a complex challenge for China's property market. As the nation grapples with a declining population, the implications for home demand are profound, suggesting a need for policymakers to address underlying economic issues to stabilize the sector. The future outlook remains uncertain, but immediate measures may be crucial to navigate the evolving landscape of China's housing market.