Coronavirus outbreak chills China’s red-hot home rental start-ups

China’s online real estate start-ups once promised to bring the country’s booming property sector into the 21st century

But the sector is on thin ice because of the market collapse and tighter government scrutiny in the wake of the coronavirus outbreak

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A man wearing a mask is seen at Lujiazui financial district in Pudong, Shanghai, China, as the country is hit by an outbreak of a new coronavirus, February 3, 2020. File photo: Reuters

Published: 9:54am, 20 Feb 2020Updated: 9:54am, 20 Feb 2020

Zhang Yan learned first-hand how the coronavirus is ravaging China’s once booming real estate economy. The Shanghai landlord on internet home-listings platform Danke was surprised when she recently got a terse notice from the company declaring it would withhold all rental payments for a month because of the epidemic.

Customers who have demanded payments owed were rebuffed because of an overload in requests. “Danke has caused me big trouble,” Zhang said of the company, which connects landlords with renters and allows them to lease flats online. “The platform should protect apartment owners’ interests. I also have a family to feed.”

China’s online real estate start-ups, which once promised to bring the country’s booming property sector into the 21st century, have been sideswiped by the public health crisis. Danke – a unit of US-listed Phoenix Tree Holdings, which is valued at US$2.2 billion – offers a rare glimpse into how a sector that has attracted billions from Tencent Holdings and other investors is on thin ice because of the market collapse and tighter government scrutiny in the wake of the outbreak.

Flat owners across the country have set up WeChat groups to discuss countermeasures. On one forum, with as many as 200 landlords claiming to lease houses on Danke, heated discussions have lasted late into the night. In Shanghai, property owners rushed to Danke’s offices, demanding the company hand over rents as usual. Some have threatened to cancel their contracts with the firm.

Danke acknowledged on February 13 that it has been “severely hit” by the spread of the coronavirus. A plethora of new virus-prevention measures imposed by local governments have inflated fixed costs as demand for its services collapses. “At this critical moment, all stakeholders in the housing rental market need to make reasonable sacrifices so that we can overcome the difficulty together,” the statement from Danke said. On Monday, it apologised in a statement for “communication issues” and asked for support from its hundreds of thousands of landlords. It did not respond to a request for comment on Zhang’s case.

In Wuhan, where the outbreak took off, Danke said it would stop paying rent for 90 days to flat owners, according to a memo reviewed by Bloomberg.

The emerging rental management sector still only accounts for a small slice of China’s property industry but was expected to rapidly expand by the end of this decade. Growing strains in the sector could harm Beijing’s plans to create a modern rental market that is necessary to ease burgeoning housing demand. The country has 190 million workers who rent, according to research from real-estate agency Lianjia. That is more than three quarters of all people living away from their homes. A robust supply of rental properties can also help delay home-buying and tame runaway real estate prices.

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