More houses and fair market can lower rents

Editor's note: Rapidly rising rents have become one of the hottest topics of discussion in China. According to data from realty agencies, the average rent in Beijing increased 21.89 percent in July compared with June. Two experts share their views on house rents and the property market with China Daily's Zhang Zhouxiang:

Supply-demand imbalance main cause of rising rents

Rents have been rising at an unprecedented pace because of the imbalance between supply and demand. This imbalance, in turn, can be attributed to a rapid decline in the number of rental houses because of the ban on group rentals and on basement apartments.

Some analysts blame real estate agents for pushing up the rents renting houses from homeowners and subletting them to the actual (or sub-) tenants. In this way, the analysts claim, the real estate agents have monopolized the rental housing market.

But this claim may be exaggerated, because if property agency rents an apartment, it has to sublet it to a "real tenant" within a short time to avoid losses. Data show that if a realty agency rents an apartment at 6,000 yuan ($876.8) a month, it generally sublets it for 7,000 yuan a month. Assuming that to be true, the agency must find a tenant within one month or forget about making any profits from the rented property.

A fairer conclusion would be: Property agencies are one of the causes, not the major cause, of rapidly rising rents; the main cause is insufficient supply of apartments to meet the huge demand for rented apartments. 

Therefore, to stabilize the rents, the government should take steps to increase the supply of rental housing. This in turn would sharpen the competition among real estate agencies, and force them to keep the rents low. Only when there are enough apartments for rent in the market and homeowners compete with each other to attract tenants can the rising rents be curbed.

Liu Yuanju, a researcher at the Shanghai Institute of Finance and Law

Capital flow, speculators to blame for high rents

Some say the imbalance between supply and demand for rental housing is the main cause rising rents. But official data show Beijing's population declined by 22,000 at the end of 2017 compared with the previous year. Which means lower demand for rental housing.

Despite the increase in the number of college graduates in July, rents should not have risen so abruptly. True, those college students who have graduated need to rent an apartment after moving out of the college dormitory, but the supply-demand relationship alone is not responsible for the rapid rise in rents. Besides, the demand for rental housing is not as high as in the past years.

It is the inflow of capital that has increased speculation in the rental housing market, and pushed up rents. Media reports have already highlighted how real estate agencies, driven by capital, pursue excessive profits in the rental housing market. Reports also said the ten fierce competition between Danke Apartment and Homelink's online apartment rental platform operator, Ziroom, caused apartment rents to increase from 7,500 yuan a month to 10,800 yuan.

The rent hike is worse than the increase in housing prices because it affects the poor people most. There may be reasons to understand everyone cannot buy a house, but there is no reason to accept that people cannot even afford to rent an apartment.

To bring normalcy back to the housing market, the authorities should make it clear to property dealers, speculators and homeowners that houses are for living in, not speculating. And they should take measures to free the rental housing market of speculators, so that rental housing becomes affordable for all.

Pan Helin, an economist with the Chinese Academy of Fiscal Sciences