China to add more rentals to ease housing headache

BEIJING - China will build more rental housing for people in cities where housing prices have left people unable to afford homes.

Besides imposing purchase restrictions and higher mortgage rates last year, China is exploring ways to increase the housing supply.

Non-real estate companies may be allowed to build residential housing on their land, said Minister of Land and Resources Jiang Daming on Monday.

Construction of rental housing is already allowed on some rural land, a trend sure to be expanded, so the government will no longer be the sole provider of building land, Jiang said.

Non-property developers and villages will be allowed to build housing for rent rather than for sale. Many companies, particularly state-owned ones, hold undeveloped land and are expected to enter the market, said Zhang Dawei, chief analyst at Centaline Property.

In the past two years, property developers have bought land to build rental houses in more than 10 cities. China Vanke, the country's top property developer, has spent 17 billion yuan ($2.6 billion) on five plots in cities including Beijing and Guangzhou.

Developers will be burdened with high funding costs while authorities are likely to see sharp declines in land sales if they continue to sell cheap rental housing land, said Yan Yuejin, senior researcher with E-house China R&D Institute.

Local governments have historically been the sole provider of land for residential property and many relied heavily on the real estate industry for their income.

Rural collectives have been allowed to build and rent housing on rural construction land on a trial basis since last August. Beijing plans to offer 1,000 hectares of such rural land for rental housing by 2021.

China will put in place a housing system that ensures supply through multiple sources and encourages both purchases and rental, according to the annual Central Economic Work Conference last month.

The rental market could help slow housing price rises, said Liu Jun, head of China Construction Bank's Guangdong branch.

The government's attempt to build more rental housing is part of regulation of the property market and balanced economic growth, said Vanke's chairman Yu Liang.