China’s housing demand resilient through to 2030: Fitch

China’s housing demand will remain relatively resilient over the next 15 years, according to a Fitch Ratings report, but oversupply risk grows if homes are built at the current pace.

China would need to build 800 million square metres of residential space – the size of Singapore – a year up to 2030 to meet demand, Fitch said on Monday.

Fundamental demand will be underpinned by residents who need new homes as their families grow and those moving from rural areas to urban cities, who account for 31 per cent and 25 per cent of the demand respectively.

The demand, estimated at 12 billion sq metres from 2016 to 2030, would also be buoyed by residents who needed new housing due to demolition of their old homes (37 per cent) and upgraders, the report said.

The bullish outlook contrasted with domestic projections that home sales already peaked in 2013 and demand would fall along with demographic changes, slowing urbanisation, a pile-up of unsold housing stock.

Wang Ying, the main author of the report, said the projected demand trailed actual sales for now, which stood at 1.28 billion sq metres last year.

“The demand will be stronger than many believe. But if new supply is kept at the current level, there is a risk that it will far exceed demand at some point,” Wang said.

Fitch also said previous estimates by other analysts on potential demand from demolition of old properties, which it said alone could create 4.44 billion sq metres in demand, might have been underestimated.

It assumed all pre-1990 properties would be demolished by 2030 and half of those built in the 1990s would be upgraded by last year.

The report was also prepared on the assumption that affordable housing built by the government would fulfil only half of the country’s long-term target, so 90 per cent of the demand would be met by homes built by developers.