Home prices force many to turn to rental market
Owning a home has always been a priority for many Chinese, but with home prices rocketing in recent years, many people are turning to the rental market to get a roof over their heads
About 10 years ago a Chinese television series called Woju, which refers to homes the size of a snail’s shell, became hugely popular because it depicted the struggles families had to go through to buy a home in big Chinese cities.
Many young viewers reckoned the show accurately reflected real life, when people would scrimp and save for years only to realize they still did not have enough for a deposit on a home.
In Chinese culture owning a home has long connoted stability. Even though buying a home in first-tier cities usually means depleting family savings and having to pay huge mortgage loans for decades, many people still take the plunge.
In 2015 the average monthly salary in Shanghai was 5,939 yuan ($860), and a dual-income family would have needed to save every single penny for about 20 years to buy a 90-sq m apartment.
In December the average price of new homes in Shanghai was 40,794 yuan a square meter, compared with 39,307 yuan a sq m in Beijing and 57,998 yuan a sq m in Shenzhen, Guangdong province, according to E-House (China) Holdings Ltd.
Chen Lina, an analyst with Shanghai Sinyi Realty Agency and Consulting Co, says those who rent homes even though they can afford to buy one are either expatriates or those who have yet to find an affordable or ideal property.
Zhong Zixuan is one individual who can afford a home but has chosen to rent. Zhong and her husband first shared an apartment with another tenant in Zhangjiang region of Pudong New Area in Shanghai before relocating to different parts of the city numer-
ous times. The couple and five other family members now rent a 175 sq m three-bedroom apartment in Jing’an district for which they pay 20,000 yuan a month.
Zhong says many of her friends and relatives have asked her why she is reluctant to buy a home even though she can afford one. She wants to earn even more money so she can afford the ideal home in a central location like Jing’an, she says.
However, these days an increasing number of people choose to rent even though they can afford their dream home. Shu Yi, a marketing director at a local company, says renting a home gives her a sense of freedom. Not being tied down by mortgage payments gives her the opportunity to pursue her interests such as learning French, swimming, going to the gym and going on overseas trips, she says.
Since 2005 Shu has rented an apartment in Jiangsu Road, Changning district. She earns 360,000 yuan a year so could comfortably buy her current apartment, valued at about 4 million yuan. In fact her friends and family have encouraged her to do just that.
“I don’t want to be one of these people, and I am glad I’m renting instead of buying,” she says. “I am an independent person, and freedom is the most important thing to me. I do not want to let a mortgage compromise my quality of life.
“I will continue to rent a house for at least another five years. I don’t know what will happen then, but I am pretty sure that I will make the decision rationally and always give priority to quality of life.”
Central areas
Industry experts say the number of people who think like Shu and Zhong is growing, a consequence of the price of renting a home rising more slowly than the price of buying one.
The real estate services provider Savills says that between 2007 and 2015 the average price of new homes in Shanghai more than tripled, from 10,336 yuan a sq m to 32,151 yuan a sq m. In the same period rent for medium- to highend properties rose a mere 5 percent, from 173.2 yuan a sq m to 181.3 yuan a sq m. James Macdonald, head of Savills China Research, says the annual rent for a two-bed- room apartment in Shanghai is only between 1.5 percent and 2 percent of the property’s value.
Young professionals working in big cities usually prefer to rent a home in the more central areas of the city to reduce their traveling time to work, Macdonald says. Having to buy a home would usually mean having to settle for a property far from the city center where prices are lower.
Zhang Xue, who has rented homes since she graduated from Shanghai International Studies University seven years ago, prefers to rent a home close to where she works, cutting her travel time.
“On my salary I can afford to buy a small apartment in suburban Jiading district that costs about 1 million yuan. But the sacrifice is just too much. I would have to spend at least three hours a day commuting.
“Apart from that, buying the ideal home is an unreachable goal. When I earned 5,000 yuan a month the price of homes was already too high. Now even though I earn 20,000 yuan a month, the home price is still just as prohibitive.”
For Sun Yongshi, a student at the Communication University of China in Beijing, the decision to rent instead of buy comes down to environmental concerns.
“Because of Beijing’s poor air I would prefer to buy a home in Zhejiang province or my hometown in Jiangsu as an investment,” says Sun, a part-time trainee in a bank who rents an apartment.
“But the place where I want to work is Beijing.”
Cheng Sun, a Shanghai native now renting a 130 sq m apartment for which he pays 15,000 yuan a month, says rented homes afford flexibility for people like him who travel a lot for work.
“I will probably eventually be traveling between many Chinese cities and even overseas, so renting a home makes more sense. As long as the lease is long enough, I do not see any difference between renting a home and owning one.”
Rising mobility
A recent survey conducted by the Chinese online classifieds service 58.com suggested that a significant number of young people in firsttier cities such as Beijing, Shanghai, Guangzhou and Shenzhen live in rented homes.
According to Beijing News, which reported on the survey, 41.69 percent of married couples surveyed said they rent their home, and 60.26 percent of those renting a home said they will continue to do so over the next three to five years.
Macdonald of Savills China Research said the rising mobility of white-collar workers in large Chinese cities will result in more people living in rented homes, as happens in many cities elsewhere.
Chen Sheng, president of the China Real Estate Data Academy, says the government should consider adopting policies that provide tenants and homeowners with equal benefits in terms of education and social welfare.