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Macro Economy

Urbanization brings continuing demand for housing


Statistics from the National Statistics Bureau shows that there are a decreasing number of cities in China whose housing price in April rose from the previous month, while an increasing number of them saw housing prices fall. Real estate statistics look undesirable compared with previous figures and many think the real estate market will remain bearish, however, Zhang Liqun, research fellow of the Department of Macroeconomic Research of the Development Research Center of the State Council (DRC), believes that China's real estate market will not collapse thanks to an increasing demand for housing brought by urbanization.

Over the past decade, China's real estate market has gone through a long period of high-speed development, and now housing price growth has slowed and the price even fell. This has triggered a heated discussion about the trend of real estate, with some considering it a short-term adjustment and others thinking it represents the coming end of China's prosperous real estate market.

"China's real estate market is experiencing an adjustment after over a decade of development, and it is quite normal, so people should see it in a rational way," said Zhang, adding that housing prices began to fall for a period of time in some third and fourth-tier cities because of the limitation in industrial support and population inflow. As market expectations change, more people will choose to wait and see, resulting in housing price fluctuation in first and second-tier cities.

Zhang went on to say that housing demand for living is dominant in China's real estate market, and people who need housing to live and want better living conditions may wait when they can't see clearly which way the real estate market may go. But they will not wait forever. There is no need to lose faith in China's real estate market just because of the temporary adjustment.

Talking about the concern in the collapse of the real estate market, Zhang said that because China's urbanization is far from completed, there is still huge demand for housing. In addition, China has strict management of mortgage loans, and individual home loans are paid back in a stable way, making it quite different from the US real estate's subprime crisis.

Song Li, vice-director of the Institute of Economics of China's National Development and Reform Commission, also said that the continuing urbanization in China will give rise to a big demand for housing. There will be no risk of real estate collapse.