Economist Guan Qingyou 管清友, in an article, believes that the real estate market reached a turning point in 2017 and that the era of consolidation has begun.
Developers must change their vision and leave illusions behind. The good times of easy prosperity are over. We have to move from developer to artisan. Large projects, leverage with credit, must give way to better management, raise funds, and generate profits. The market is changing; a more refined approach is needed.
In 2016, the government decided to curb the real estate bubble. As of 2017, many measures targeted financial institutions linked to the real estate sector. Land grants to developers were reduced. In August 2020, the authorities further tightened their supervision to prevent speculation and credit proliferation. Faced with the pandemic, the government, in the spring of 2020, did not include real estate loans in its policy of lowering interest rates for loans. Alongside these measures, a natural phenomenon forces a readjustment of the strategy.
A decrease in the active population
With aging, the working population has been declining since 2013. In seven years, the net loss is 26 million people. The decline is expected to continue. As a result, the rigid market is less important.
The surface area per inhabitant has increased significantly over the last 30 years, reaching 20m ². The rate of progression is the first in the world. Improvements are still needed.
The potential of urbanization
China’s urbanization is accelerating, focusing on medium-sized cities, which are part of city clusters. These municipalities have implemented many policies to attract population. The economist estimates that 200 million new people are expected to move to cities. This factor presents a strong potential for companies in the sector.
Guan draws attention to the need for real estate groups to adapt to the changes taking place: increasingly strict measures to curb price increases and speculation; and the decline in the labor force. A more refined market strategy must take the place of the gigantic old projects to address newcomers. Hope can remain with the future urbanization, which is expected to bring 200 million people to the cities. They must find housing. Nothing to worry about then?
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4 October 2020