2018-08-18

Central Planning 101: Blood-Sucking Realtors! The Rent Is Too Damn High!

iFeng: 房租暴涨正在惩罚不买房的人?资本抬租抢房? 监管部门出手了
What does the average monthly rent of nearly 5,000 yuan mean? You should know that in the first-tier cities, the starting salary of college graduates last year was an average of 5,000 yuan. According to the "2018 China University Graduates Salary Rankings" data, even the top graduates of such top universities as Tsinghua University and Peking University have an average monthly salary of 9,000. According to this calculation, renting a house in Beijing alone will cost a large part of their salary.
The article has a table showing average salaries from 20 universities. Even graduates from 2013 must pay 40 percent of their salary for rent.
There are bizarre stories of rents rising like home prices during the housing bubble:
Recently, in the Shuimu community, a landlord posted that the 120-square-meter three-bedroom home of Tiantongyuan should be rented. The psychological price is expected to be 7,500 yuan/month. After asking about the two housing rental companies, they will compete for each other. Give the price of 10,800 yuan / month, pay 11 months.
Surprisingly, because of a post on the forum, long-rental apartment operators are considered to be the driving force behind the increase in rents and encounter a major public opinion crisis. Not only did it alarm Beijing's various administrative departments, the People's Daily also commented that it should strictly control the bad mediation of bad intermediaries, but long-term apartment operators also feel wronged.
The landlord who posted the post said that the agency of a company said at the time that no matter how much the other company produced, it would add 300 yuan. According to the China Times, Mr. Chen, the landlord who posted the post, said that he rented a house when he was young. He felt that young people were not easy, so he wanted to expose this matter.

In the reply to this post, many netizens shared the same experience.

The netizen named the answer, replying on August 3rd:

Around my home, the normal 7500 to 7800 a month, the intermediary is now 9500 × 11 months of large-scale collection.

The netizen named Leonardo replied on August 2nd:

I discovered this routine 2 years ago. Last year, the neighbor's two-bedroom rental market price was 5k-5.5k. I might be willing to go out for 5k when I started talking about it. The result was that the agent directly rented 8k for 3 years. He was forced to rent it to him. A week later, I saw his house in the circle of friends in the intermediary. The living room was partitioned and rented as 3 dwells. The whole rent was 9.5k.

Posts on the forum have quickly become network hotspots after being reported by the media. Long-term rental apartment operators have also been labeled as “malicious competition, raising the rent” and “sucking the blood of young people”.
Rental companies are hitting back. They say the above story and others like it are nonsense:
The People’s Daily published a comment on Weibo on the evening of August 17th:

Rents are up and down, and if it fits the market logic, it is not necessary. However, unscrupulous intermediaries make waves and maliciously promoted, not only disturbing the rental order, increasing the cost of living for tenants, but also affecting the livability of the city and harming the image of the city. Strictly prevent "specialized rents", and once the relevant behaviors are verified, they will be severely punished and jointly punished. Supervised by law, and also lease the market to be healthy.

However, long-term rental apartment operators are also aggrieved.

According to the 21st Century Business Herald, the eggshell said, "The incident mentioned in this post, we have conducted internal investigations and found that there is no such owner and property, it is false information, which is a typical rumor and disruption of market behavior. We have not We have a price war with our friends, and there is no vicious competition. At present, we are conducting investigation and evidence collection and notarization, and we will resolutely resort to legal means to protect our legitimate rights and interests."
The government concurred:
Freely, an official response was issued on August 17th, saying that the incident was a false rumor, there was no evidence, and the rent of the region was never higher than the market price.
Realtors are driving up rents, however, by upgrading properties:
However, from the perspective of the industry, long-rent rental housing is indeed an important factor in the rise in rents.

Zhang Dawei, chief analyst of Zhongyuan Real Estate, said: "Many leasing companies, especially long-term rental apartment operators, hoard low-end and low-end properties at low prices, and upgrade them. After the renovation, they rent the houses at high prices and earn rent. The difference brought by the rise."

On August 17, I loved my vice president Hu Jinghui to tell the media in the conference call that when the capital entered the long-term rental apartment, it actually pushed the rent up. Hu Jinghui directly named the free, long-rent apartment operators such as eggshells to close the market at a price 20% to 40% higher, which led to a direct increase in the cost of selling houses, which seriously violated the market rules.
Developed cities such as Beijing are also hitting a natural supply limit, in addition to the government crackdown on real estate:
Zhang Dawei believes that capital has flooded into the long-term rental apartment market, but the rental market is not much new supply. The long-rent apartment occupancy behavior has magnified the tension between supply and demand, which is equivalent to adding a barrier to earn the rent difference.
Obviously, using only "capital robbing houses" does not fully explain the current situation of rising rents.

Compared with the impact of long-term rental apartments on the rental market, experts said that the shortage of supply is an important reason for the increase in rents.

According to data released by the Shell Research Institute, Beijing has 8 million renters. The current number of leased houses is about 3.5 million, facing a rental gap of more than 4 million. Supply shortages are still the main contradiction in the current Beijing housing rental market. In fact, not only Beijing, but also major supply problems in China's major first-tier cities.
One other factor that isn't mentioned at all: recent government policies to promote renting. As is the case with every government policy shift, speculators and smart money front run the move.

The two cities with the highest increase in rental prices are Beijing and Shenzhen. Only two months ago, there was news that China was promoting lending for long-term rentals. One of the first moving cities was Shenzhen.

The Final Stage: China Copies U.S. Housing Bubble Policies
Liu Feng, a 28-year-old product manager, was one of the first to take out a rental loan from CCB for his 90 square meter (970 square feet) three-room apartment in Shenzhen.

He said his monthly payments under the plan - including interest - came to about 6,000 yuan, less than if he paid for it himself, meaning the bank was effectively subsidizing his rent.

“The property developer leased the apartment to CCB, and CCB leased it to me,” said Liu.
There's no mention of the government's rental promotion scheme, but credit-backed rental agreements goes a long way to explaining how prices could suddenly rise as they did during housing bubbles when overall consumer prices and wages are stable.

To recap, the government is cracking down on new home construction and home sales. Real estate companies are shifting into rentals. The government has a pilot program of giving "mortgages" to renters. Rental companies are renovating housing and increasing rents. There's a great imbalance between rental units and rental population in some cities. Rents are soaring.

Looks like the market is functioning perfectly, producing the output (prices) that one would expect given these conditions.

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