Chinese developers warn more rentals will hammer margins
China’s biggest developers scale up their rental building programmes in a bid to echo President Xi Jinping’s hopes that more homes should be built ‘to be inhabited, and not for speculation’
Thousands of new rental properties are set to be rolled out across China over the next three years, as part of a national effort to keep surging home prices under control.
Major mainland Chinese developers including Country Garden, China Vanke, Longfor, Poly Real Estate and China Overseas Land & Investment have all confirmed they are expanding their leasing portfolios in a bid to echo President Xi Jinping’s hopes that more homes should be built “to be inhabited, and not for speculation”.
But already, some are warning they expect margins to remain low for quite some time as a result, with the eventual pay-offs expected to take far longer to filter through than on straight sales.
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Shao Mingxiao, Longfor’s chief executive officer, put it bluntly recently while reporting the company’s annual results: to carry such a large rental portfolio, means its leasing business can only hope to “break even, for now”.
It expects to put 50,000 new rental units onto the market over this year, with another 20,000 units expected to come on stream later.
Yu Liang, the chairman of Vanke, has also pledged loyal support to the government-led initiative.
But the country’s second-largest developer by sales has suggested that as pay back, the government should be willing to bend on certain other policies, such as offering developers preferential interest rates and tax policies.
