China’s migrant population bolsters real estate market in central, western China

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A government report indicates China’s inland capital cities are drawing in more migrants while northeastern rust belt provinces face the risk of a shrinking population. Population mobility, as a key indicator of regional economies, would decide ups and downs of the real estate market and cities as the growth in residents is expected to be coveted by more real estate investors.

China’s Migrant Population Report for 2016 recently released by the National Health and Family Planning Commission reveals that from 1982 to 2015, the migrant population of China had increased remarkably from 11.54 million to 247 million, with one in six citizens having migrated from his or her registered residence.

The report predicts the trend to continue to the year 2030, when migrant population is expected to climb to 327 million. The rise in migration would not only affect China’s population policy and urbanization, but to a large extent affect the development of local real estate markets.

Some inland capital cities including Chongqing, Chengdu, Wuhan, Xi’an, Changsha, Hefei, and Zhengzhou have shown more obvious strength in attracting migrants. Migrant population is predicted to drive up the housing market in central and western China, and cities drawing in more migrants would become top choices for investors.

The report predicts that during the 13th Five Year Plan period, migrant population would continue to flock into coastal areas and areas with main transport lines. Big cities would see more people flow in, while central or western China would see more active migration of workers within the provinces.

Meanwhile, northeastern China has witnessed an exodus of population for 20 years. The report warns that considering the continuous outflow and the low fertility rate in the area, the three provinces of Jilin, Liaoning and Heilongjiang may soon witness a plunge in population.

Besides northeast China’s dilemma, some smaller and less important cities in China are also witnessing a population decline. For example, Henan province in central China is only registering population increase in its capital, Zhengzhou. Among migrants from outside the province, 41% head to the city, and the ratio is 60% for those within the province. For the provinces and cities featuring an exodus, the trend is hard to be reversed within short time.

Migrant population props up real estate market

An increase in the migrant population usually drives up the local housing market. For the cities that are capable of drawing migrant population, the need to buy houses and settle down generates ‘rigid demand’ and bolsters the housing market.

The mainstream migration toward East China and eastern cities has continued. According to the report, in 2013, 75.7% of migrants headed to the east, while 14.9% to the west; by 2015, the ratio changed to 74.4% and 16.6% respectively. It is obvious that East China still features the biggest migrant population while the west has just begun to draw more people there.

Wang Qian, an official with the National Health and Family Planning Commission in charge of migrant population’s family planning scheme, noted that East China has been attracting mostly migrants from outside of the province, while central and western China tends to feature migration from within a province. It is still rare to see people from the east migrate across provinces into western China.

By the end of 2015, five cities or provinces that have gained the largest number of population inflow are Shanghai, Beijing, Tianjin, Zhejiang, and Jiangsu, all in East China. Shanghai, with a net inflow of 9.82 million, tops the list, while Beijing and Shenzhen take respectively the second and third places. Housing prices in the three cities are the highest in the whole country.

After the top three first-tier cities, Dongguan has attracted 6.3 million migrants, listed as the fourth highest, and Tianjin, listed as the fifth, 5.2 million. Guangzhou is behind Tianjin by around 0.2 million, while Suzhou and Foshan exceed 3 million. All of these cities are seeing a surge in housing markets.

Yang Runian, an official with the National Health and Family Planning Commission’s Wuxi office in Jiangsu province, said, “Yangtze River delta’s booming economy is related closely to the major national strategies. The densely populated area is working on constructing a world-class urban agglomeration, allowing more migrants to start their own businesses or seek employment here.

Still, the rate of population inflow is slowing down due to the need of population dispersion. From 2013 to 2015, Beijing has witnessed a decline from 290,000 to 39,000. Policies like putting a cap on population growth, raising threshold to gain permanent residence, and phasing out middle and lower end industries have all contributed to the decline.

Real estate analysts agree that housing markets in cities featuring population outflow tends to destock slowly with declining prices. China Securities analyst Su Xuejing said first-tier cities in East China including Beijing, Shanghai and Guangzhou would continue to benefit from migrant talents, with rapid economic development and high salary levels. Besides, she suggested more attention should be paid to Beijing, Tianjin and Hebei province, and the Yangtze River economic belt that would greet more migrants thanks to the One Belt, One Road initiative.

Back to west

Central and western China has long seen population outflow, while the situation has gradually improved now. The report predicts that several capital cities in the region will gain more opportunities for growth soon.

Migrant population is actually returning to the central and western China. “With urbanization moving ahead and more development taking place in the region, migrant workers that now work in East China may continue to return home. Chongqing, Zhengzhou, Wuhan, Chengdu, Shijiazhuang and Changsha—the major central and western China cities would soon witness population growth,” Ren Zeping, Founder Securities analyst said.

Northeast China ‘trapped’ in population crisis

The exodus of workers from northeast China has continued for 20 years. The report indicated that the population crisis in the area is getting really severe now, dragging the economy and housing market, leading to a vicious circle.

In 2010, Liaoning province registered the lowest fertility rate of 0.74 nationwide, Heilongjiang and Jilin provinces followed closely by 0.75 and 0.76. In the first half of the year, Liaoning province posted the only GDP decline in China. The year 2015 had seen investment increase by 1% in real estate industry nationwide, while the figure for northeast China had gone down by 28.5%. In the first three quarters of 2016, investment in real estate in Liaoning province declined by 40.1%.  

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