Economic review

China's first tier cities lead rent hike

2016-6-14 09:51:00 (Beijing Time)         China.org.cn

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(File Photo)

Rising property prices in China's major cities have scared off many young people and the situation is only becoming worse as rent in these cities is becoming unaffordable.

Core cities have more job opportunities than third or fourth tier cities. However, the rent prices are often unaffordable. Young people are forced to pay these unaffordable rent prices if they want to stay in core cities.

Statistics for rent in 42 major cities show that Beijing, Shanghai and Shenzhen C cities in the first tier C take the lead in housing rent nationwide. They are closely followed by Guangzhou, Hangzhou, Xiamen and Sanya.

The average monthly rent in Beijing has already hit 71.24 yuan (US$10.86) per square meter per month, as data shows. In other words, to rent a 100-square meter house in Beijing, one should pay more than 7,000 yuan (US$1,067). The price is naturally much higher in regions closer to the city center.

By contrast, Shijiazhuang, Hohhot, Wuxi, Urumqi and Hefei sit at the bottom of the 42-city ranking. The average monthly rent in Shijiazhuang and Hohhot is both below 20 yuan (US$3.05) per square meter. For Hefei, the capital of Anhui Province, rent remains low despite recent fast-rising home prices. This may predict a rent hike in the future due to the hysteresis effect between the rent and the price.

The rent-price ratio is international criteria in evaluating a city's property market, and a ratio between 1:200 and 1:100 would signal a healthy market. The ratio also predicts the payback period of property investment.

Xiamen, which is a second-tier coastal city, features the lowest rent-price ratio of 1:756 in China, which also represents the longest payback period. In other words, the owner has to collect rent for 756 months, or 63 years, before making a profit on a property.

The excessively low rent-price ratio affects the development of the rental market, said Zhang Dawei, chief market analyst of Centaline, a real estate company. He said that compared to people in developed countries, Chinese are more prone to invest in real estate, regarding it as a deposit of wealth fending off inflation. Therefore, housing prices in China are higher compared with the income level.