Growing number of mainland Chinese would rent homes rather than buy amid economic downturn, analysts say
- Sentiment has waned and some potential homebuyers would rather extend their leases instead of buying a home, China Index Academy analyst says
- Tenants see renting as more like longer term ‘settling’: Beike Research Institute
Linda Chen, 28, sold her 70 square metre (753 sq ft) home in China’s eastern Hangzhou city for a discount of about 300,000 yuan (US$41,963) and moved into a rented unit of similar size with her husband in December, after paying around 9,000 yuan in monthly mortgage payments for years.
Even after several rounds of mortgage ratio cuts introduced by the authorities last year, the couple still needed to pay more than 7,000 yuan per month, which triggered their decision to sell.
“It was not an easy decision to make, but [the house] was a huge burden,” she said. “I know we needed to sell no matter what the price.”
Chen and her husband are among a growing number of people who would rent rather than buy amid the downturn in China’s economy.
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“At present, sentiment has waned and some potential homebuyers have decided to extend their leases instead of buying a home,” said Xu Yuejin, an associate research director at real estate research firm China Index Academy.
The market for rented homes is experiencing some changes because of this trend, analysts said. Overall demand has risen steadily, but there has been a divergence between units at different price points.
There were about 290 million tenants in China as of the end of last year, and the gross value of rent contracts grew to more than 2 trillion yuan, according to an analysis by Beike Research Institute, a Chinese property think tank.
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According to China Real Estate Information Corporation (CRIC), however, the value of the rental homes market is expected to grow by 2 per cent to 1.8 trillion yuan by 2026 from an estimated 1.7 trillion yuan last year.
Beike said it expected leasing demand to increase this year, driven by families that choose to rent instead of buying amid expectations of lower economic growth and a record number of university graduates flooding the market.
“The period that tenants have been living on rent for has increased, as they no longer see rented properties as just ‘temporary homes’,” the agency said. “Instead, they see renting as more like longer term ‘settling’.”
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The rental market is seeing a “consumption downgrading” phenomenon, which means some tenants prefer properties with lower rents, China Index Academy’s Xu said.
A semi-annual survey conducted by China Index Academy at the end of last year shows that 64 per cent of about 9,000 respondents from across China would consider moving to cheaper rented homes when their leases end, with expectations of lower incomes among their top reasons, Xu added.
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“The amount of rents being paid went down overall last year, if you look at the performance of 55 cities [tracked by CRIC],” said Li Jianlin, research director in CRIC’s long-lease department. There was an overall downswing in tenants’ ability and willingness to spend, she added.
“Many individual landlords, who dominate the market rather than institutional landlords, found it difficult to clinch deals for a while after putting their homes up for rent, and were forced to cut rents or else they would lose tenants.”
Also, they are being squeezed by cheaper rental homes backed by the government flowing into the market, Li added.
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In a report released by 58 Anjuke Real Estate Research Institute last month, indicators that reflect supply and demand for rented property rose for medium and low-priced units and decreased for high-priced units, in 40 cities tracked by Anjuke.
In first-tier cities, supply and demand for homes with monthly rents ranging between 501 yuan and 2,000 yuan – relatively low-priced properties – rose by 2 per cent and 2.1 per cent, respectively. Supply and demand for homes with monthly rents ranging from 2,001 yuan to 5,000 yuan decreased by 2.7 per cent and 1.9 per cent, respectively, according to Anjuke.
“Overall, the market showed a lower price for rent, which reflects weaker affordability [among tenants],” the report said.
