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Urbanization and China’s Housing Inventory

Xinhua’s Economic Information Daily recently published an article reporting on discussions that the attendees at the 2016 Boao Forum for Asia had about China’s large housing inventory. They expressed the belief that, in order for China to be successful in reducing its housing inventory, the number of new local residents must increase. About 70 percent of China’s real estate inventory is located in third or fourth tier cities such as capitals of less developed provinces, prefecture-level cities, and county-level cities. 

According to the article, experts at the forum pointed out that new residents who come to these cities may be the primary group to reduce the housing inventory. Urbanization based on population has reached 56 percent while urbanization based on registered urban residents is 37.5 percent, 18.6 percentage points lower. Farmers who left the countryside to work and live in the cities do not enjoy the same benefits in terms of pay, education, social security and housing, which makes it hard for them to take root in the cities. To incentivize these former farmers to buy houses in the cities requires the reform of the urban household registration system to allow them to register as well as solutions to other issues they face, such as enabling them to dispose of and liquidate their old farm houses. 

Source: Economic Information Daily, March 31, 2016