In the latest five-year plan for house market development in Shanghai, the local government said healthy growth of the property sector would give residents “a sense of gain, a sense of security and a sense of comfort.”

The document, published on Friday, is seen as an operating guide for the city’s real estate sector because it lays the groundwork for land distribution, urban redevelopment and housing market policies.

In the last five years, Shanghai has built 150,000 units for rental, responding to central government efforts to lower the cost of living for ordinary people.

The Chinese authorities have been working to establish a transparent rental market that caters to strong long-term demand in the country’s major cities. Thanks to this, tenants are now granted the same rights as homeowners when it comes to education and employment.

“Allocating more land for rental homes will effectively help the city contain wild gains in home prices,” said You Liangzhou, owner of property agency Baonuo in Shanghai. “With more homes for renting, many young professionals will feel relieved because they do not have to amass a big sum of money as down payment for a flat.”

In Shanghai an average two-bedroom, pre-owned flat could cost more than 10 million yuan (US$1.54 million), a price beyond the reach of most young wage earners, whose monthly income would typically stand at about 10,000 yuan.

Home prices in Shanghai climbed in every month between December 2019 and May 2021, triggering worries among city officials that a housing bubble was taking shape.

Last month, the Communist Party’s Central Committee and the State Council jointly published a blueprint about transforming Pudong, on the eastern bank of the Huangpu River, into a pioneering zone displaying China’s progress in building a modern socialist system.

Under the guidelines, Shanghai is encouraged to develop core technologies in semiconductors, artificial intelligence, biotechnology and civil aviation.

“Lofty home prices are a stumbling block for Shanghai’s rise because talented engineers will baulk at the prices and decide not to relocate to the city,” said Hong Lingyun, a senior executive with recruitment services firm Joinlink Consulting.

Low-cost land and tax incentives are inspiring developers to build and operate more rental homes, according to Hanah Zhang, chief executive of the rental homes unit of Cifi Holdings (Group).

Nationwide, Beijing plans to earmark 10 per cent of fresh residential land supply for the construction of rental homes under the 14th five-year plan.