A few months after her wedding this year, Lilian Li moved from the southwestern Chinese city of Chongqing to an apartment near Beijing’s financial district.
But while Chinese newlyweds typically view property ownership as an important next step after marriage, Li and her husband instead bought a two-bedroom apartment in the capital for 13,000 yuan ($1,821) a month. ).
For Li and her family to buy the same apartment, the down payment alone would require more than RMB 5 million, equivalent to more than 30 years of rent.
“My husband and I had a deep discussion about the life we wanted and came to an agreement not to buy,” said 28-year-old Lee. ”
A growing number of young Chinese buyers of urban housing are making the same decision. Troubled real estate market.
Affordability is a thorny issue for homebuyers. China, the average home price has almost doubled in the last decade. Rents also rose, but fell sharply. According to calculations by real estate data firm Zhuge Zhaofang, the ratio of residential property purchase cost to monthly rent was over 600 in major cities in June 2022. In 2007 he was under 400.
According to a report by the Chinese Academy of Social Sciences, a national think tank, a ratio above about 200 is seen as a warning signal of a potential property price bubble.
According to property data provider creprice.cn, the average apartment price in Beijing is currently around RMB 69,000 per square meter.
First-time buyers typically rely on family support and debt to buy living space in big cities. However, the problem for real estate developers such as Evergrande is Defaulted last year A liquidity crisis hit the real estate sector, leaving many buyers with unfinished homes. This has led potential buyers like Mr. Li to question what has been seen for decades as China’s premier household investment opportunity.
Home sales by floor area in 100 Chinese cities fell about 20% in October from a year earlier, according to a survey by property research firm China Index Academy. Sales in prime locations in big cities have not fallen as fast, but market-wide pessimism has dampened confidence. Although prices for new homes remain high, the average price across 70 cities fell 2.4% year-on-year in October, marking the seventh consecutive month of declines, government data showed.
“What’s the point of buying real estate like crazy when there is no wealth creation effect? Why not rent it?” said.
The research arm of China International Capital Corporation predicts that the number of Chinese renters will increase by 200 million, reaching 300 million by 2035.
Buying enthusiasm is waning as the government moves to make more affordable rental housing available to young people as part of President Xi Jinping’s commitment to “common prosperity.”
Authorities market and roll out rental housing with government subsidies Sector ‘mitigation policy’ Includes low-interest loans for rental housing developers.
High housing prices in major cities put “huge pressure” on young people, said Chi Chi Zhang, Shanghai-based director of Warburg Pincus, a US private equity group that first invested in Chinese rental properties in 2013. said to give.
The government “want to promote rental housing to solve the accommodation needs of young people,” said Zhang.
In January, China’s housing ministry announced a goal of building 6.5 million affordable housing units in 40 cities over five years by 2025. This is enough to accommodate 13 million young people and new residents.
Government promotion of the rental housing market is increasingly intertwined with support for property developers struggling to complete housing construction projects.
Financial regulators last month called for a state-led conversion of unfinished homes to rental housing, revealing more sophisticated financial channels to help banks and investors buy up unfinished projects.
In response, the government of Kaifeng city in central China’s Henan province said it plans to buy more than 1,000 unfinished apartments from Evergrande next year and convert them into rental housing.
In the central city of Xi’an, seven banks, including China Development Bank and China Construction Bank, have pledged to provide RMB 210 billion in credit lines to support rental housing projects.
CCB, the country’s second-largest bank by assets, said it had set up a separate 30 billion yuan rental housing fund to buy unfinished housing projects in more than 20 cities. A banker familiar with the fund’s operations said some projects were bought from the developer at his 50% discount on the original home price.
Morgan Stanley analysts said in a research note that the state’s promotion of rentals is in line with President Xi Jinping’s 2015 call for housing to be “for living, not for speculation.” However, they wrote, “This process will take time and will primarily serve as downward support for the housing market for the time being.”
Lee said renting rather than buying saves her and her husband money and thus maintains their quality of life.
“When I’m old and ready to retire, I can buy an apartment in Chongqing,” she said. “Until then, I think I will continue renting in Beijing.”