China has an unstable real estate market. The China Developers Index is down at around 35 percent in 2015 but at the final two months of the year, the performance changed.
According to JPMorgan Analyst Ryan Li, he predicts that this momentum will continue in 2016.
"For the first time in the past six years, the market could start looking at China Property not only from a trading perspective, but from a long-term stable demand/supply perspective," Li said according Bloomberg. "The sector could see a gradual but slow re-rate starting [in] 2016."
To continue the trend, there should be continued reforms of the Chinese household registration system, or hukou, wherein a citizen's access to different benefits is determined by their place of permanent residency. Only less than one fifth of China's population lives in urban areas without an urban hukou, and they do not have access to benefits while residing in the area. Paupers in the area could only access aid only in the parish where they live in based on the Poor Relief Act of 1662.
One possible solution to the inventory problem of China that refers to its empty buildings is the promotion of the area's "urbanization by bolstering the safety net for rural migrants."
"With the government's intention to encourage 'human-oriented' urbanization through hukou reform, more rural residents will move to cities with better access to social security," Li added.
When the Chinese government reaches its urbanization goal, there would be a possible 3.5 to 4.5 million increases per year through 2020 with a growth of 33 percent relative to that of last year's.
"Changes might involve changing rules to allow individual ownership in rural areas and a 'go-back' mechanism; directives to induce the proper type of individual to get an urban hukou; and mechanism on how to provide sufficient funding to the local governments to support policy changes," Li continued.
