Tenants on move as rents soar in Beijing

Agencies expand

In Chinese cities, agencies buy or rent apartments from individuals or landlords. They then restore the apartments in a similar style to build up a brand and to rent to tenants. The agencies profit from the difference in price and also charge management fees to both sides.

As these agencies, including Ziroom, YOU+ and MoFang Apartment, have gained billions of dollars in investment and grown rapidly in the past two years, they have expanded their market share by buying a large number of apartments. This helps them to monopolize the market and raise rents, China Real Estate Business, a newspaper focusing on the industry, reported last week.

Xia Lei, deputy head of the Evergrande Research Institution, co-established by the Evergrande Real Estate Group and Tsinghua University, said capital has played an important role during the latest round of rent increases.

"Under the pressure of competition, the agencies have kept raising capital to invest in renting apartments to gain pricing power," Xia said. "The investors urgently want to start making money ... which will inevitably lead to soaring rents.

"Housing prices are an economic issue, while rent is a social problem. Increased housing prices may affect economic stability, but rapid rent growth will affect people's living quality and willingness to consume, which will damage a city's competitiveness and attraction."

He said the government should intervene in the rental market and regulate the industry.

Zhang Dawei, chief analyst at Centaline Property Agency, said increased capital has entered the long-term rental market and transformed mid-and low-end apartments into high-end ones, resulting in rent increases.

"In January, Ziroom announced a 4 billion yuan financing plan, with a clear target of gaining more apartment contracts," he said.

On Aug 9 and 17, the Beijing Municipal Commission of Housing and Urban-Rural Development and other related authorities organized meetings with major real estate agencies including Lianjia, Century 21 China and Centaline Property as well as online platforms that publish rental information. It asked them to strictly examine information relating to the apartments and to stop operating if they did not have a business license.

The commission also ordered the agencies not to use bank loans to buy apartments.