China’s housing market (1) [WIP]

Urbanization and population

According to the World Bank, China’s urban population percentage increased from 36% in 2000 to 60% in 2019, or around 843 million[1]. Two largest cities in China, Shanghai and Beijing, have 24.3 million and 21.5 million residents respectively in 2019 (Exhibit 1).

in millions	2000	2005	2010	2015	2019
Beijing	13.64	15.38	19.62	21.71	21.54
Shanghai	16.09	18.90	23.03	24.15	24.28

Exhibit 1. Beijing and Shanghai residents growth over the past two decades

While the definition for a “resident” is to live for more than 6 month of a given year, two other metrics are “Hukou” and “actual population served / managed” – Hukou, the most conservative one, is a concept dated back to ancient China while the latter is newly disclosed. In 2019, measured by actual population served / managed, Guangzhou has over 22 million, Shenzhen has over 22 million[2], Chengdu has over 21 million[3]. Meanwhile, their official residents in 2019 are 15.3, 13.4 and 16.6 million respectively.

While Hukou population for Shenzhen is only around 5 million, the actual population is 4 times more. The gap seems to be a good proof for Shenzhen’s fast growth over the past few decades, and also implies an outsized demand for future home buying. As further discussed below, Hukou (or certain years of social security tax) has become the prerequisite to buy homes in certain large cities such as Shenzhen. Therefore, fundamentally, the long-term increase in buying pressure is from 1) among the actual population, those who would like to stay in Shenzhen, obtain Shenzhen Hukou and buy homes, 2) the constant increase in actual population managed / served, as Shenzhen continues to attract businesses and provides high-quality jobs.

[1] https://data.worldbank.org/indicator/SP.URB.TOTL?end=2019&locations=CN&start=2000

[2] https://www.thepaper.cn/newsDetail_forward_7843440 (Chinese)

[3] https://m.bjnews.com.cn/detail/159193229415528.html (Chinese)