China's property sector sees high-quality growth driven by urban demand
On July 31, the State Council unveiled its "Five-Year Action Plan" designed to advance urbanization, aiming to increase the country's urbanization rate to "nearly 70%" within five years. This commitment is intended to facilitate the movement of residents from rural to urban areas, serving as a crucial engine for economic growth. Additionally, it aims to refocus policies on enhancing people's livelihoods while creating structural opportunities for China's real estate industry and housing market.
TroibNews 
**Editor's note:** Bruce Pang is chief economist and head of research at JLL Greater China. The article reflects the author's opinions and not necessarily the views of CN.
On July 31, the State Council unveiled its "Five-Year Action Plan" aimed at enhancing urbanization, with an ambitious target of raising the country’s urbanization rate to nearly "nearly 70 percent" over the next five years. This initiative is expected to facilitate further residential migration to urban areas, refocusing policies to prioritize citizen livelihoods and creating structural opportunities for the real estate sector and housing market in China.
China has entered the middle and advanced stages of rapid urbanization, with the urbanization rate of the resident population reaching 65.22 percent in 2022, surpassing the 65 percent target set for the 14th Five-Year Plan period. By the end of 2023, this rate climbed to 66.16 percent, and data reflecting actual population density may indicate that it has already exceeded 70 percent, bringing it closer to levels seen in developed countries, which hover around 80 percent.
This trend suggests there is still potential for growth within China’s real estate market, although the previously favored approach of extensive development is no longer considered sustainable or suitable.
As a result, the real estate sector is transitioning from an "incremental era" to an "inventory era." The traditional business model employed by property developers—characterized by "high turnover, high leverage, high return"—will need to evolve into one that emphasizes refinement, structural optimization, and quality enhancement. Nonetheless, demand persists among individuals seeking their first homes or looking to improve their housing situations, showing no signs of diminishing.
Regarding structural changes, metrics such as urban housing stock, average housing unit size, urban homeownership rates, and the ratio of housing units to households have all shown considerable growth. However, there are still notable structural disparities and localized tightness within the overall balance of supply and demand in China's housing market. The rigid housing demand in cities, particularly in high-tier areas, remains substantial with potential for expansion, influenced by urban-rural disparities and geographic variances, as well as property policies, residents' income and wealth, and housing affordability.
In the context of urbanization, insights drawn from historical patterns and international experiences, alongside the unique characteristics of China’s economic and social conditions, suggest that various resources and productive capabilities will continue to concentrate in major cities and key city clusters at an accelerated pace. China's five main city clusters, supported by both policy initiatives and market dynamics, are becoming critical drivers of urbanization, evolving from world-class cities into prominent city clusters. It is reasonable to anticipate that in the coming decades, a trend of rural populations relocating to urban areas will generate lasting, stable, and predictable housing demand within high-tier cities and core city clusters.
To successfully meet these objectives, it is essential to ease restrictions on the local household registration system, or "Hukou," broaden social security coverage for rural migrants settling in cities, and ensure that their housing needs, as well as access to education for their children, are addressed, as highlighted in the State Council's Action Plan. Current statistics reveal that only 48 percent of the Chinese population is officially recognized as urban residents, indicating an 18 percentage point gap below the overall urbanization rate. This data suggests that approximately 250 million rural migrant workers have not yet accessed Hukou-related public services in their places of residence.
Research indicates a negative correlation between housing affordability and the intent of the mobile population to stay during their household formation period, and a positive correlation between the level of public services and the intent of the floating population to remain during their household expansion phase. It is anticipated that the number and quality of basic public services available to non-registered residents will steadily improve, and the shift in urban development models will be expedited to create livable, resilient, innovative, intelligent, green, and humanistic cities, as pledged in the "Implementation Plan for New Urbanization in the 14th Five-Year Plan" released by the National Development and Reform Commission in 2022.
It is believed that ongoing urbanization will lead to an increasing number of registered residents experiencing enhanced public services that are more accessible and inclusive. It is expected that housing challenges faced by newcomers to urban areas, young people, and other groups in major cities will be addressed through a rise in the availability of government-subsidized rental housing and increased fiscal support for cities, all aimed at attracting more talent from other regions.
Sanya Singh contributed to this report for TROIB News
On July 31, the State Council unveiled its "Five-Year Action Plan" aimed at enhancing urbanization, with an ambitious target of raising the country’s urbanization rate to nearly "nearly 70 percent" over the next five years. This initiative is expected to facilitate further residential migration to urban areas, refocusing policies to prioritize citizen livelihoods and creating structural opportunities for the real estate sector and housing market in China.
China has entered the middle and advanced stages of rapid urbanization, with the urbanization rate of the resident population reaching 65.22 percent in 2022, surpassing the 65 percent target set for the 14th Five-Year Plan period. By the end of 2023, this rate climbed to 66.16 percent, and data reflecting actual population density may indicate that it has already exceeded 70 percent, bringing it closer to levels seen in developed countries, which hover around 80 percent.
This trend suggests there is still potential for growth within China’s real estate market, although the previously favored approach of extensive development is no longer considered sustainable or suitable.
As a result, the real estate sector is transitioning from an "incremental era" to an "inventory era." The traditional business model employed by property developers—characterized by "high turnover, high leverage, high return"—will need to evolve into one that emphasizes refinement, structural optimization, and quality enhancement. Nonetheless, demand persists among individuals seeking their first homes or looking to improve their housing situations, showing no signs of diminishing.
Regarding structural changes, metrics such as urban housing stock, average housing unit size, urban homeownership rates, and the ratio of housing units to households have all shown considerable growth. However, there are still notable structural disparities and localized tightness within the overall balance of supply and demand in China's housing market. The rigid housing demand in cities, particularly in high-tier areas, remains substantial with potential for expansion, influenced by urban-rural disparities and geographic variances, as well as property policies, residents' income and wealth, and housing affordability.
In the context of urbanization, insights drawn from historical patterns and international experiences, alongside the unique characteristics of China’s economic and social conditions, suggest that various resources and productive capabilities will continue to concentrate in major cities and key city clusters at an accelerated pace. China's five main city clusters, supported by both policy initiatives and market dynamics, are becoming critical drivers of urbanization, evolving from world-class cities into prominent city clusters. It is reasonable to anticipate that in the coming decades, a trend of rural populations relocating to urban areas will generate lasting, stable, and predictable housing demand within high-tier cities and core city clusters.
To successfully meet these objectives, it is essential to ease restrictions on the local household registration system, or "Hukou," broaden social security coverage for rural migrants settling in cities, and ensure that their housing needs, as well as access to education for their children, are addressed, as highlighted in the State Council's Action Plan. Current statistics reveal that only 48 percent of the Chinese population is officially recognized as urban residents, indicating an 18 percentage point gap below the overall urbanization rate. This data suggests that approximately 250 million rural migrant workers have not yet accessed Hukou-related public services in their places of residence.
Research indicates a negative correlation between housing affordability and the intent of the mobile population to stay during their household formation period, and a positive correlation between the level of public services and the intent of the floating population to remain during their household expansion phase. It is anticipated that the number and quality of basic public services available to non-registered residents will steadily improve, and the shift in urban development models will be expedited to create livable, resilient, innovative, intelligent, green, and humanistic cities, as pledged in the "Implementation Plan for New Urbanization in the 14th Five-Year Plan" released by the National Development and Reform Commission in 2022.
It is believed that ongoing urbanization will lead to an increasing number of registered residents experiencing enhanced public services that are more accessible and inclusive. It is expected that housing challenges faced by newcomers to urban areas, young people, and other groups in major cities will be addressed through a rise in the availability of government-subsidized rental housing and increased fiscal support for cities, all aimed at attracting more talent from other regions.
Sanya Singh contributed to this report for TROIB News
