(Yicai Global) July 14 -- Demand for residential property in China fell last year and will go on falling through 2035 as the demographic dividend wanes, but the market will not drop sharply, according to a new report from the research arm of China’s biggest realtor Beike Zhaofang.

Demand will drop an average 2.5 percent a year from 2021 to 2035, according to a forecast made by Beike Research Institute yesterday. Annual demand for new housing will fall to 1.3 billion square meters by 2035, from an average of 1.9 billion sqm between 2016 and 2020.

The value of transactions will continue to rise each year though, as house prices will increase at a moderate pace, the report said. Based on annual price gains of 4.3 percent, transaction growth will maintain an annual clip of 1.8 percent to reach CNY29.2 trillion (USD4.3 trillion) by 2035.

Despite softening, demand will exceed 20 billion sqm by 2035, so the real estate market will not see a steep decline and can still develop, the report said.

It also said future demand will take three forms: urban residents’ wanting to upgrade, making up the bulk of demand at 54 percent; rebuilding following urban demolitions, which will make up 28 percent; and the migration of population to urban from rural areas, which will account for just 18 percent, as urbanization has entered its middle and late stage.

The sector’s development model will also change, with consumers paying more regard to life quality as well as more space, the report said. Residential services, including property management, rental operations, and home renovations, are expected to develop quickly, it added.

Beijing-based Beike Zhaofang is also known as KE Holdings, which is listed in New York and Hong Kong.

Editors: Dou Shicong, Futura Costaglione