CGTN | 10-Jul-2020 | By Michelle Van den Bergh
Beijing’s rental market has seen decreasing demand in the first half of 2020, and experts agreed that cooling may likely continue into early next year.
The latest data show average rent at 83.1 yuan (about 11.9 U.S. dollars) per square meter, down 2.5 percent from the second half of 2019. There was a slight bounce back in July, up 0.5 percent from June, but still 7.4 percent down from the same time last year. The vacancy rate in first-tier cities went up to almost 25 percent.
Brett Hartley, the assistant to the CEO of the online real estate platform Beike Zhaofang, told CGTN that prices might rebound slightly in the short term, but in the long run, rental prices in first-tier cities are expected to remain subdued.
“We are likely to see this cooling continue at least in the medium term. And although we might see a bounce back in the high activity months of August and July,” said Hartley. “We expect and anticipate the cooling trend to continue at least into early next year,” he said.
Hartley said in addition to lowering demand, a more affordable rental supply will also keep prices in check as the “growth of rent prices is very unlikely with low demand swinging bargaining power away from landlords and towards tenants.”
Expert: Three factors to falling rents
Hartley said three factors have contributed to the falling rental prices in the capital. The first, he said, was that COVID-19 related restrictions on entering communities and housing complexes, which makes it more difficult to look at places for rent, have suppressed demand.
“The second is government-related policy that eases congestion in the city, and this has been amplified by a COVID-affected job market in which businesses simply do not have as much need for out of town workers as they need before,” he said. The third is the disruption of the academic calendar, which has delayed the traditional high season of students looking for accommodations.
Another overarching trend that is pressuring rental prices and demand is Beijing’s slowing population growth. The population has been falling since 2017, in line with the city’s 2016-2035 urban plan that emphasizes the city’s role as the political, economic and technological capital of the country in addition to being the main hub for international trade and development. Capping the city population at 23 million is one of the measures set out in the urban plan.
Hu Jinghui, a chief economist at Jinghui Thinktank, said, “From 2017 to 2019, the population of Beijing has decreased because many companies have moved out of Beijing, so the jobs also moved out. Therefore, demand for rental housing has decreased.”
Hu said local governments in the first-tier cities have used land in suburban areas to build more apartments, providing a lot of extra supply of affordable housing for rent. So in the long term, with sufficient supply and decreasing demand, rental prices are expected to remain steady. (Cover image via VCG).
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