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 sector has grappled with a deepening downturn for years. Now, a shrinking population is casting another shadow over the stagnant property market. Recent estimates suggest that demand for new homes in Chinese urban cities will remain suppressed at under 5 million units per year in the coming years—about one-fourth of the peak of 20 million units in 2017.

“Falling population and slowing urbanization suggest decreasing demographic demand for housing” in the coming years, noted economists from a major investment bank. The country’s population is projected to fall below 1.39 billion by 2035 from 1.41 billion, largely due to fewer newborns and an aging population.

This shrinking population is expected to reduce home demand by 0.5 million units annually throughout the 2020s and result in a sharper decline of 1.4 million units each year during the 2030s. This contrasts with the positive contribution of 1.5 million units in the 2010s, when the population was on a steady rise.

The fertility rate has continued to decline even after the relaxation of the one-child policy in 2016. Efforts to incentivize child-bearing through financial grants have had limited success, as stagnant incomes, job insecurity, and a weak social security system discourage young people from expanding their families.

The impact of these pronatalist policies is likely to be minimal as they do not tackle the underlying challenges, such as the high costs associated with child-rearing and the trend of postponing marriage for career advancement and personal freedom.

Supporting evidence of declining birth rates can be seen in the closure of nearly 36,000 kindergartens nationwide over the past two years, with preschool enrollment dropping by over 10 million, according to official figures. Similarly, the count of elementary schools has decreased by nearly 13,000 between 2022 and 2024.

This demographic shift is influencing housing markets adjacent to schools, where inflated prices had previously been driven by demand for access to quality education. However, with a decreasing population and local governments revising enrollment policies, the added value of these homes has begun to wane, according to experts.

A resident in Beijing shared that the price of her apartment has fallen by about 20% since her purchase over two years ago, which had already been considerably above the average value in the city for access to a reputable school for her son.

The number of children entering primary school reached its highest level in over two decades in 2023 but saw a drop in 2024, coinciding with her son’s enrollment year.

This demographic change adds another layer of complexity to the property market, which has struggled to recover from a downturn that began in late 2020. Despite numerous interventions from both central and local governments, the trend has shown little sign of reversing.

New home prices fell at their quickest rate in seven months recently, extending a two-year stagnation despite efforts to stabilize the market. Sales of new homes in 30 major cities dropped by 11% year on year in the first half of this month, intensifying from a 3% decline in May.

“Holders of investment properties are likely to be net sellers to owner-occupiers for the foreseeable future,” as expectations of falling home prices persist. While there are predictions that the urbanization rate will slow, affecting demand for urban housing, the demographic impact on the property market may take time to fully materialize.

In the immediate future, some decline may be counterbalanced by continued urbanization and an increasing demand for housing upgrades.