Good news for landlords

As fewer buy properties, rents in Beijing are going up

Good news for landlords

Mao points the way on prices

One of China’s more controversial television series in recent years was Dwelling Narrowness. One of the show’s main storylines followed the difficulties of a white-collar couple trying to get on the property ladder. Stuck in rented accommodation in the middle of a property boom, they found it increasingly difficult to achieve their dream of buying a house.

The show’s realistic depiction of life in urban China made it unpopular with the authorities and it was forced off air before it reached its finale.

Although the final episode of Dwelling Narrowness was broadcast more than two years ago, the issues it addresses are still topical ones – especially for renters in major cities. A recent report by property company Homelink says the cost of renting in some of the leading cities is continuing to grow at a rapid rate. In 2011, the average monthly rent for residential properties in Beijing went up by 10.5%, compared to annual rate of inflation of 5.4%. Rents rose by 9% in Guangzhou.

Increases in Shanghai were more forgiving at 4.5%, according to the report.

Part of the problem is that some renters are holding off from buying property, hoping that sale prices will be reduced to more reasonable levels.

But even though a correction seems to be underway – average home prices are dropping according to a series of different surveys – many renters are still priced out of the real estate market and have no choice but to rent.

Beijing and Guangzhou have experienced some of the steepest rental increases because they also have the highest ratio of residents to residential properties, Zhang Yue, an analyst at Homelink told CBN.

That’s because the two cities have been absorbing more out-of-towners than most of their peers.

Beijing has the most: last year, they accounted for 64% of the city’s new resident population.

A growing population puts extra demand on housing supply. Meanwhile regulations introduced last year in the Chinese capital aimed at slowing property price rises for new homes, has helped turn more people towards renting.

The rules state that anyone who wants to buy a property in Beijing must have worked in the city for at least one year. They must also show that they have paid their taxes and contributed to the social security fund.

The aim of the policy is to stop speculators from other cities buying up properties in Beijing. But it also has the effect of keeping some of the city’s recent arrivals out of the property market, said Zhang, directing them instead towards renting.

Zhongguancun, Beijing’s high-tech hub, illustrates the problem. Around two-thirds of the white-collar workers in the area are from outside Beijing, of which 60% are not qualified to buy property, reports Beijing News.

Instead, they rent, competing for properties with their relatively high incomes.

Blue-collar workers, less capable of keeping up with rental hikes, are then forced to lease property farther from their workplace.

For the worse-off migrants, rising city costs, including rents, may eventually lead to a reversal of some of the people flow to the bigger city locations.

“These people have aspirations to live in the city but then realise when they get there that they can’t afford it, so they won’t stay,” Kim Wing Chan, a professor at the University of Washington, told AFP.

This suggests that the growth in demand for rental accommodation could moderate as migrant workers return home.

But with a recent survey suggesting just 4% of migrant workers plan to return home to a life of farming, it could be wishful thinking.

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