Goldman Sachs (GS, Financial) is sounding the alarm on China's housing market—and the numbers are hard to ignore. In a recent report, the bank projects that demand for new homes in urban areas could stay about 75% below its 2017 peak for years to come. The culprit? A combination of falling population, slower urban migration, and collapsing price expectations. Annual demand could hover just under 5 million units—far from the 20 million-unit peak that once defined the sector's boom. For investors, this suggests structural pressure on an industry that once fueled nearly a fifth of China's GDP.
Digging deeper, Goldman's analysts estimate that demographic demand could fall by half within a decade—dropping to 4.1 million units annually between 2025 and 2030, compared to 9.4 million in the 2010s. That kind of shift isn't just a warning sign for homebuilders—it's a flashing red light for investors still holding onto empty apartments as a bet on appreciation. With price expectations declining, many of these investors may become sellers in a softening market, adding even more weight to an already oversupplied system.
While Beijing has rolled out stimulus efforts—including tapping a $1.5 trillion fund—momentum appears to be slipping. May's housing data showed the steepest price decline in seven months, suggesting the 2023 policy boost may be running out of steam. And though officials continue to pledge support, structural headwinds may outweigh tactical moves. For investors with exposure to Chinese developers or building materials, this isn't just a cyclical dip—it could be the early innings of a multi-year reshaping of the sector's fundamentals.
