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China’s ‘industry policy’ unexpectedly helps unruly property firms to raise rents
As China upholds apartment rental as an alternative to home ownership in order to satisfy housing needs of the country’s ever-growing migrant population, industry observers cautioned that the “industry policies” which hand out subsidies and bank loans may be facilitating greedy real estate firms to push up rental prices in multiple first-tier cities, leaving tens of millions of tenants under mounting pressure.

With home rents in major Chinese cities surging up over the past several months, ‘new urbanites’ are worried they may be forced to leave at some point. “In the past, I could not afford buying a flat in the big city where I work and live; and now I could not even afford to rent one,” a netizen complained on Chinese social media, immediately attracting a host of comments sharing common concerns.

Since this July, there has been news about rental prices going up in big cities like Beijing every now and then, accompanied and proven by data of multiple research bodies which monitor the market.

Take Beijing as an example. In July, the rental prices in Beijing had increased by 25.6 percent year-on-year with rents in certain areas in the city going up as much as 40 percent, according to data from, a specialized search engine for finding real estate properties. Besides the capital city, Shanghai, Shenzhen, Guangzhou and even some popular second-tier cities have witnessed a surge in home rents.

Against the backdrop, a senior executive with one of the top real estate firms disclosed to the media that with the money flowing in, some apartment rental agents were sparing no effort to speculate on the market. The whistleblower’s disclosure about unruly real estate agents colluding in order to ramp up rental prices was later supported by a couple of industry analysts.

The veteran real estate agent revealed the brokerages were trying to seize as many flats as possible. “Some real estate agents operating long-term rental apartments like Ziroom and Danke Apartment are collecting houses from landlords at prices 20-40 percent higher than the market value, in order to gain larger market share. And they have purposely propped up the rental prices,” said Hu Jinghui on August 17 in a phone meeting with the media.

Hu worked as the vice president of, one of the biggest real estate brokerages in China, although he immediately stepped down from the post after the disclosure. Hu explained the common practice was to revamp the flats or sublet one property to multiple tenants in order to gain higher profit, and all these would push rents up.

Under the circumstances, many industry observers believed the so-called “industry policy” that grants subsidies and incentives to get more investment into the sector is the real reason behind the greedy agents’ urge to speculate on the rental markets.

Since last year, the Chinese government has issued a raft of incentive policies to encourage the development of long-term rental apartments, which instead only led to its “barbarian growth”, Tao Zhichong, a real estate observer wrote in an opinion piece published on Tao said that collecting houses from original landlords and then subletting the properties have become quite profitable business with all the subsidies and venture capital flowing in.

Both well-established and emerging real estate agents are rushing to tap the capital markets in order to raise money for developing government-backed long-term rental projects. It’s reported by Caixin that rental service Ziroom raised 4 billion yuan ($621 million), the largest amount ever to be pulled in by a Chinese apartment rental service provider in January 2018. As well, Danke Apartment was reported to have raised a total of $100 million this year. Many industry insiders believe in order to attract more investors and then more money, the rental prices must go up to prove the business is highly profitable.

Real estate agents in China no longer just work as intermediaries, wrote Tao, noting many of them try to gain entrustment and then make money from subletting. “In first-tier cities like Beijing, 90 percent of rental homes are in the hands of agents. It’s not hard to find out that prices could be easily manipulated in this way as the agents are in a good position to speculate on the market,” Tao wrote, emphasizing that relevant rules overseeing this part of the market are not yet in place.

Although government-backed media sources generally pin down short supply of rental homes as the culprit behind the surging prices, Chinese authorities have reportedly “talked with” involved rental service agents.

The Beijing Municipal Commission of Housing and Urban-Rural Development announced on its website that the agency had “interviewed” top managers of rental companies including Ziroom and Danke Apartment along with several other governmental agencies in the finance, and taxation sectors. According to the statement, the home rental agents had been warned not to use bank loans to take over apartments through offering prices well above the market level and not to purposely bid up rents.

“The rental markets tend to be quite market-orientated, so it would be challenging (for the government) to take control through administrative vehicles,” Liu Wu, an analyst with China Development Bank Securities was quoted as saying.

Tao suggested in his article for the government to put a stop to all preferential policies. “Let the market play its role, and let the businesses be held responsible for their own profit and loss.” Besides, Tao proposed for the now ‘ambitious’ real estate agents to be more strictly regulated or prohibited from taking on home subletting business to prevent them from manipulating the market.


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