Renting homes easy way out in runaway market

On Sept 13, a State-owned enterprise specializing in dealing with home rentals came into being in Shenzhen.

The company, with a registered capital of 1 billion yuan ($152.6 million), is expected to play an active role in providing professional and standardized services to millions of tenants in the city.

The company's creation is part of the latest efforts by the Shenzhen government to ease the city's growing housing problem. With property prices continuing to go through the roof, reaching a level that's well beyond the reach of the ordinary folk, Shenzhen is making intensive strides to develop the home-rental market, hoping to rein in soaring homes prices by diverting some of the purchasing demand to the rental sector.

In August, the Urban Planning, Land and Resources Commission of Shenzhen Municipality published on its official website a scheme on how to go about on the matter.

According to the document, the city will set up three to five State-owned home-rental enterprises by the end of this year. They will offer no fewer than 100,000 apartments for rent through various means, including new construction, reconstruction, acquisitions and leasing under the 13th Five-Year Plan period (2016-20). The number, however, does not include affordable housing, a kind of housing provided to qualified applicants at prices that are much lower than the market's, or the type of housing provided to talents at various levels.

The aim is to "basically form a home rental market system with diversified providers, standardized services and stable leasing relations, and to create a number of home-rental enterprises with a certain scale that can provide professional services and carry out standardized operations by 2020", according to the guidelines.

Property developers, brokerages, property management and other entities are encouraged to transform their businesses or develop new business in the rental sector. The government will provide tax incentives, subsidies and financing support to help them make the move.

Developers are also ordered to allocate no less than 20 percent of the planned construction area to be used for building rental homes.

"The government's move to develop the city's rental market is expected to help balance supply and demand, thereby undermining the dynamics for property prices to rise further," said Song Ding, director of Tourism and Real Estate Industry Research Center at Shenzhen-based think tank China Development Institute.

"At present, policy measures are the key steps taken by the government to curb housing prices. It may have a better effect if market-based measures are also introduced," said Song.

According to Shenzhen's housing construction planning (2016-20), the city's total housing demand is expected to reach 1.8 million units during the five-year period, with the rental sector taking up nearly 1.1 million units. About 70 percent of the city's population live in rental homes, signaling huge demand.

However, the local home-rental market has long been disordered, with underdeveloped policies and weak regulations. Many homes for rent are in poor conditions and tenants are not able to enjoy the same services as homeowners in the same community. Most people have reservations about renting homes and this has, to some extent, affected the sector's development.

"But, the situation is expected to improve as the government moves to regulate the market. The rights of tenants will be better guaranteed and their status will be enhanced. I expect 10 to 20 percent of potential homebuyers to switch to rental homes in the coming three to five years. In the long term, it's possible for that percentage to go up to 50 percent," Song told China Daily.

But, he pointed out that it would be a difficult process and a hard objective to achieve, depending on how well rental homes are built and tenants' legal rights are ensured.

Meanwhile, Jasper Tan, project controller of advisory services at Colliers International Shenzhen office, believes that the effect of the latest measure lies in stabilizing the city's rental prices and retaining its attractiveness to talents.

"While a large number of graduates and entrepreneurs flock to Shenzhen each year, low-price and high-quality rental homes are in short supply. As rental prices keep rising and the rights of tenants can't be guaranteed, some of the talents are forced to leave the city," Tan said.

"By creating new supply and vitalizing existing housing resources, the government could, to some extent, help stabilize rental prices. Also, by launching regulative measures, it could provide a better rental environment and retain its attractiveness to talents."

sally@chinadailyhk.com

(HK Edition 10/13/2017 page9)