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al housing stock by city tier Housing price change by city tier
of its housing stock. Thus, the effects of a slowdown in tier 3 property markets, they argue, will almost
certainly have serious consequences for China’s broader economy.
The end of real estate as a driver of China’s growth? China’s property sector is currently facing
a major downturn. The authors of this study assert that the underlying causes of this current malaise may
not merely be due to the government’s tightening of lending regulations but may rather be long term
and structural. Especially in tier 3 cities, residential housing is being oversupplied, housing demand has
peaked, and prices are falling steeply. The real estate sector over the past few decades has been one of
China’s pillar industries, accounting for 22.5% of China’s GDP in 2021, even excluding imported content.
The growth from the housing markets has been vital to sustaining local government fiscal revenue,
household wealth, and employment in China. Due to China’s unique urban developmental trajectory,
moreover, these tier 3 cities collectively exert a far greater impact on the country’s economy than many
assume. Hence, China’s growth strategy, which has placed construction at its core, now shows signs of
faltering, and its property market, which has generated such spectacular growth to date, may now prove
to be a drag on China’s economy.
SOUTH CHINA BUSINESS JOURNAL 28
of its housing stock. Thus, the effects of a slowdown in tier 3 property markets, they argue, will almost
certainly have serious consequences for China’s broader economy.
The end of real estate as a driver of China’s growth? China’s property sector is currently facing
a major downturn. The authors of this study assert that the underlying causes of this current malaise may
not merely be due to the government’s tightening of lending regulations but may rather be long term
and structural. Especially in tier 3 cities, residential housing is being oversupplied, housing demand has
peaked, and prices are falling steeply. The real estate sector over the past few decades has been one of
China’s pillar industries, accounting for 22.5% of China’s GDP in 2021, even excluding imported content.
The growth from the housing markets has been vital to sustaining local government fiscal revenue,
household wealth, and employment in China. Due to China’s unique urban developmental trajectory,
moreover, these tier 3 cities collectively exert a far greater impact on the country’s economy than many
assume. Hence, China’s growth strategy, which has placed construction at its core, now shows signs of
faltering, and its property market, which has generated such spectacular growth to date, may now prove
to be a drag on China’s economy.
SOUTH CHINA BUSINESS JOURNAL 28
