One child or two: Will China’s new population policy impact the housing market?

In October, the Chinese government announced that it will ease its 35-year-old one-child policy to allow all couples to have two children. The new policy is expected to provide tremendous stimulus to mainland’s housing market as allowing households to have a second child is expected to boost the country’s average family size and thus housing demand.

According to the National Health and Family Planning Commission, the policy change is forecast to bring 3 million more babies to the country per year. Based on the per-capita living space of about 30 sqm in China according to market sources, the policy is expected to boost an extra housing demand of approximately 90 million sqm every year.

If this is the case, three to four-bedroom flats, which are generally for upgrading purposes, will then be in high demand in order to accommodate households of an increased size. Developers are expected to supply more such housing units.

Large flats, particularly those in areas with a concentration of schools and universities, are expected to be increasingly sought after, boosting their prices. In addition, the secondary housing market may also benefit from the increase in relocation and upgrading demand.

Although the policy change may not provide an instant stimulus to the housing market, it is expected to gradually reshape the demographic structure and residential market on the Mainland in the longer term.

http://www.knightfrankblog.com/global-briefing/in-focus/one-child-or-two-will-chinas-new-population-policy-impact-the-housing-market/