2017 marked an explosive year of growth for the long term rental apartment market. Government policy support and capital investment from the private sector has fuelled rapidly development.
The domestic residential leasing market is in the early stages of development, with the majority of leasing options limited to expensive high-end serviced apartments run by institutions and servicing either the expatriate community or increasingly high net worth Chinese individuals, or poorly managed and highly fragmented mass market owned and largely managed by individuals.
Increasing residential prices, decreasing housing affordability and a highly mobile workforce as well as a younger more spendthrift demographic that prefer to invest in stocks and P2P platforms than bricks and mortar, have created the backdrop the development of a solid base of demand for the rental market. This need and opportunity has been realised by the government and businesses, which have put into motion the steps required to address a lack of intuitionally owned, managed and operated residential properties.
“National New-Type Urbanisation Plan (2014–2020)” – Aims to develop the residential leasing market by putting an equal emphasis on both the sales and leasing market.
The Ministry of Housing and Urban-Rural Development (MOHURD) issued a draft guideline for cultivating and developing the residential leasing market.
The State Council announced policies aimed to accelerate the development of the leasing market, such as allowing commercial zoned properties to be re-designated for residential leasing use.
MOHURD issued draft rules aimed at cleaning up the property sales and rental market.
A notice issued by MOHURD and other government departments, China is pushing the development of the home rental market in large and medium cities in order to address rising rental demand from urban newcomers.
Beijing authorities have begun soliciting public opinion on a housing rental draft policy aimed at protecting the rights of tenants.
Governments have allocated a larger percentage of auctioned land to be developed as residential properties for lease only or “long term rental apartments (????)”. In Beijing once price ceilings at residential land auctions are met by bidders, remaining rounds of bidding are based on the percentage of buildable area that will be held by the developer for lease only. In Shanghai, land plots specifically designated as lease only have been released in recent months at significant discounts to “for-sale” residential land.
Beijing has seen 28 residential plots with lease-only components auctioned off in 2016 and 2017, potentially providing up to 1.43 million sq m of long term lease apartments assuming an average size of 60 sq m per unit this would be equivalent to 23,800 units.
Buildable area of long term rental apartments (by area), 2016 – 2017
A number of cities have also outlined targets for assigning a certain amount of construction land to the development of long term rental apartments within their 13th five year plans.
Residential zoned land in 13th five year plans
Based on Beijing’s five year plan (2017–2021), the city will significantly increase the supply of rental housing over the next five years. A total of 1,300 hectares of land will be assigned for the development of “for-lease” residential which will contribute 500,000 units.
With less than 24,000 units currently under development Beijing has barely started along its journey to develop a more diversified and sustainable housing market that can meet the needs of the changing demographics in the nation’s capital.