Infrastructure build-out is supporting demand. New infrastructure is making outlying suburbs viable for buyers, and the cities we visited all have projects in process. Take Hefei as an example, it had one metro line operating at the time of our visit, but the local government plans another 12 and they are either under construction or in the planning stage. Other infrastructure projects, like inner-city ring roads, are also being executed in most of the cities we visited.
Policy relaxation is boosting rural-urban migration. China is promoting urbanization by making it easier for people to migrate to cities and get access to urban social services. Strict rules governing eligibility for an urban residence permit have put off migrants in the past but these rules are now changing. In cities like Wuhan, the local government is trying to retain college graduates in the city by providing them with incentives, like urban residency status and cash rebates, and that is boosting property demand from new city residents.
Low land supply is squeezing the market. Supply of new development land has fallen steadily in cities like Nanjing and Shanghai, but the urban population in these cities is growing rapidly. In Shanghai, the population grew 23.2% between 2006 and 2016 to 24.2 million, according to official government statistics, but the supply of new land for residential development has fallen during the past five years. Our contacts told us that in this situation, new housing supply is getting increasingly tight, which is putting upward pressure on prices.
Total Area of Land Supplied for New Residential Developments: Shanghai & Nanjing, 2011-H1 2017 (Millions of sq.m.)