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Nation’s rental market expected to see solid growth by 2022

Wang Ying
Updated: Dec 14,2018 9:34 AM     China Daily

As many as 750,000 new rental apartments will pop up in China’s major six cities by the end of 2022, pushed on by favorable demographics, rising barriers to home ownership, supportive policies and an influx of capital, according to a new study.

The report, titled Opportunity knocks: The rise of China’s rental housing market and released by property consultancy JLL this week, looked at the rental housing markets in six major Chinese cities: Beijing, Shanghai, Shenzhen, Guangzhou in Guangdong province, Hangzhou in Zhejiang province and Chengdu in Sichuan province.

Despite the cities having a collective population of around 88 million people, the group had just 135,000 rental units between them, as of the first half of 2018.

However, it is expected that 750,000 units newly-added rental apartments, will be available as of year-end 2022, said the report.

“China’s rental housing sector has expanded rapidly in recent years, benefiting from a double shot of market growth and policy support,” said Deniel Yao, head of research at JLL China.

By 2022, the rental housing markets of Hangzhou, Guangzhou and Chengdu will be mostly owned by developers, while those of Shanghai, Beijing and Shenzhen will be dominated by State-owned enterprises.

By global standards, China has one of the highest rates of home ownership. Even so, more than 200 million people rent their homes in China, and the rental market value is worth more than 1 trillion yuan ($145 billion).

Renters are particularly seen in first and second-tier cities. However, this group traditionally has relied on China’s uneven leasing market, which suffers from unstable rental periods and a low level of transparency, said Yao.

Such problems are faced by thousands of renters each year, including Cai Chen, a 25-year-old who came to Shanghai two years ago.

“In the past few weeks, I was exhausted looking for a new place to live because my landlord asked me to either move out or find a new flatmate,” Cai said. Luckily she found a new person at the last minute and could resume her tenancy.

“I have heard of the fantastic living condition of rental housing, but there is such a limited amount,” she lamented. “I really hope that I can one day live in one of those rental homes, so that I can feel at home in the city.”

Chinese demographics are changing. The millennial generation, 400 million people in all, accounts for nearly 30 percent of the country’s population. The cohort are known to have high mobility and are more willing to move to cities for work. That has pushed up demand for rented accommodation.

The report also points out that while marriage and childbearing are still two main drivers for young Chinese in buying a home, high house prices and a growing preference to start a family later have led many couples to put off the big purchase.

Also, starting in late 2015, house prices began to pick up significantly, which means larger down payments and rising mortgage interest rates. All that has helped widen the gap in monthly outgoings for renters versus home buyers.

By 2017, the average home price to income ratio in Beijing, Shanghai, Shenzhen and Guangzhou was as high as 34.9 years.

Meanwhile, China’s central government has made developing the rental housing market a priority, working out key policies to promote the rental housing market in terms of land supply, financial support for developers and operators, and personal tax incentives for renters.

The market’s rapid development has also been boosted by investment, as venture capital firms rushed to back the asset-light operations of some major rental companies in recent years, the report said.

“China’s rental housing market is booming thanks to a variety of driving forces. The leasing model is undergoing significant change from the C2C format to the current B2C rental housing format,” it said.