China property

‘Life is extremely difficult’: high rents in China’s big cities a challenge for migrant workers

  • Shanghai has about 10 million residents who have come from other parts of China. Most cannot buy property locally
  • 750,000 new rental homes to hit markets in Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou and Chengdu by the end of 2022, according to JLL
PUBLISHED : Tuesday, 25 December, 2018, 11:00am
UPDATED : Tuesday, 25 December, 2018, 2:18pm

Zhang Jing, 30, moved from Jiangxi province to Shanghai eight years ago, with the dream of making it big in mainland China’s commercial and business capital. But now he says it is just a pipe dream.

And he has grounds for resentment – the high cost of living in Shanghai. The property sales agent pays 4,000 yuan (US$580) a month in rent for a 30 square metre apartment in Tangqiao, in the city’s Pudong district.

Rent accounts for half his monthly pay. “Landlords, whether owning commercial or residential properties, have been the top beneficiaries of the city’s economic boom,” he says. “The rents just keep climbing and increase our living costs.”

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Shanghai has a population of about 10 million residents who have come from other parts of China to live and work. Most do not have a local hukou, or household registration, and cannot buy homes in the city amid austerity measures aimed at reining in property prices.

The demand for rental homes is expected to hit four million units, and Shanghai’s municipal government plans to build thousands of homes for renting. These are earmarked for low-income residents, start-up entrepreneurs and professionals working in the technology sector. The city also plans to allocate more land for rental homes.

And it is not alone. The central government and other major cities across mainland China are also working to expand the supply of rental homes as a way of attracting talent and bolstering economic growth.

Global property services company JLL said 750,000 newly completed rental homes would hit the markets in China’s six major cities – Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou and Chengdu – by the end of 2022. The new supply represents about a sixfold increase over the current stock of 135,000 units in these six cities, according to JLL.

This news, however, fails to cheer up Zhang. “I can’t afford to wait another four years to build towards a brighter future,” he says. “Sluggish property transactions have adversely affected my income, and rents are going to rise again in 2019. Life is extremely difficult.”

Residents in cities who are from other parts of China have to rely on the country’s shadow rental market – apartments owned by Shanghai natives in this case. The rents in Shanghai normally jump by 5-10 per cent year on year. The market also suffers from unstable rental periods and low levels of transparency.

The Chinese authorities have been working to establish a transparent rental market, to cater to a strong long-term demand for rented living spaces in the country’s developed cities. The central government is giving rental home projects priority in terms of land distribution and is granting tenants equal rights as compared with homeowners.

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According to JLL, mainland China is home to more than 200 million people who rent homes. A study by RentCafé, a division of Yardi Systems, shows Shanghai was the third most expensive city in Asia based on rent rates in 2017, behind only Hong Kong and Singapore.

The lease for an average one-bedroom apartment in Shanghai costs US$1,910 a month, but average rent stood at US$2,740.

For people like Zhang, who earn about 10,000 yuan a month, lower rents can lead to an improvement in overall living standards. “If I can save 1,000-2,000 yuan in rent, I can spend more on food and clothes,” he says. “Rent is a big factor that affects my life.”

Chinese developers warn more rentals will hammer margins

A clutch of mainland developers, including Longfor Properties, China Vanke and Sino-Ocean Group Holding, are expanding their home rental services to tap demand from low and middle-income residents unable to buy a flat.

China’s market will be a developed sector thanks to further policy incentives by the government, says Daniel Yao, head of research at JLL China. “The prospects for growth are good”, as continued encouragement by the government will lead to an “an influx of capital” into the development of rental homes, he said.

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