Wary home buyers keep rents buoyant

PUBLISHED : Wednesday, 14 September, 2011, 12:00am
UPDATED : Wednesday, 14 September, 2011, 12:00am

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More mainland home seekers are deciding to keep renting instead of buying in anticipation of a further fall in prices, contributing to the continuing rise in rents across the nation.

'A unit release at a reasonable rent will get a tenant in two days,' said Lu Xiaoming, of Ming Ming Property Consultant in Shanghai.

With central government moves to curb demand and contain prices, property transactions have tumbled 50 per cent.

'More and more people are deferring buying as they expect prices will decline further. It will create more demand for rental properties,' he said.

Residential rents in Shanghai have risen as much as 15 per cent, or 400 yuan (HK$487) to 500 yuan, more per month this year.

Eight out of nine cities monitored by the China Real Estate Index reported a year-on-year rise in rents in August. Major cities such as Beijing rose 12.24 per cent last month from a year earlier, Guangzhou rose 11.28 per cent, Suzhou 13.17 per cent and Chongqing 13.91 per cent.

Doris Leung, who has been leasing since she moved to Shanghai in 2002, just signed a new lease for a 117-square-metre flat in Xuhui district for 5,700 yuan a month, nearly 30 per cent more than her previous lease in the same area. 'The unit size is more or less the same as before but the rent has increased a lot,' she said.

Her previous landlord had not asked for big rises when the lease was renewed over the past five years because she had been a good tenant. She never missed a payment and took care of the property. She was forced to move because the landlord wanted the flat for his own use.

'We found it is not easy to find a replacement as the number of units put on the market for lease is not as many as five years ago,' she said.

Leung wanted to buy a flat after the central government's measures to slow growth in home prices started to take effect. 'But it is easier said than done as there are many restrictions for home purchasers and the lower loan-to-value ratio kept me away from buying. I decided to continue leasing instead,' she said.

Assuming she would lease for the next 10 years, rent would cost her about a million yuan, she said. 'That amount of money spent on renting is hardly enough to buy a home in Shanghai anyway. More importantly, I'd have to bear the downside risk if I bought now.'

In Guangzhou, agents believe rising inflation could push up rents over the next year.

Susan Zhang, an agent at Hopefluent's Guangzhou branch, said lease transactions had increased significantly since the government introduced its cooling measures.

'The number of sale and purchase transactions dropped to a meagre one or two deals every month but leasing transactions have risen to 10. It shows the leasing market is very active,' she said.

Most of her potential tenants were looking for flats renting for 4,000 to 5,000 yuan a month, she said.