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    Room to Maneuver as Shanghai’s Rental Market Steadies

    Lower income expectations and the growing supply of subsidized housing are affecting prices, but fluctuations mostly reflect traditional seasonal trends.
    Jan 10, 2024#property#economy

    China’s rental market usually sees two peaks a year: The first runs February to mid-March, when people return to work after the Lunar New Year holiday; the other is in July and August, when schools and universities across the country produce millions of fresh graduates.

    During these periods, cities experience relatively high month-on-month increases in residential property rents. As demand slows in September, though, prices tend to stabilize, and in some places will even fall.

    In the final quarter of 2023, the average rental price in China fell 0.1% each month, according to data from the National Bureau of Statistics.

    Overall, rents in China’s first-tier cities — namely Beijing, Shanghai, and Guangzhou and Shenzhen in the southern Guangdong province — saw comparatively little change throughout the year, while second-tier cities experienced slightly more pronounced fluctuations. The sharpest decreases were in third- and fourth-tier cities, the official data shows.

    According to the China Real Estate Index System (CREIS), 19 of 50 major cities surveyed in 2023 saw rental prices increase. For example, in Sanya, on the island province of Hainan, and in the Hunan provincial capital, Changsha, rents were up by more than 3% year on year. By contrast, prices fell by over 5% in the cities of Wenzhou in Zhejiang province, Xuzhou in Jiangsu province, and Zhengzhou in Henan province.

    Staying stable

    In Shanghai, the past 12 months have been somewhat uneventful in terms of its residential rental market, with fluctuations mostly in keeping with traditional cycles. However, the city did experience unseasonal year-on-year and month-on-month price rises in November and December.

    At the end of November, the average price of a rental property in Shanghai stood at 84.1 yuan ($12) per square meter, 1.69% higher than in August, according to CREIS.

    Among the city’s districts, only Qingpu and Jinshan saw declines in November. Prices were down 1.39% and 1.84% respectively compared with the same period in 2022. Meanwhile, some downtown districts saw upward trends. For example, Jing’an registered year-on-year growth of 0.37% while Xuhui saw a 0.81% month-on-month increase in November.

    Supply and demand

    Evidence suggests that the reduced affordability of tenants has put downward pressure on the market nationwide. A survey by the Beijing China Index Academy, a market tracker, found that almost 40% of the respondents who were planning on moving home were motivated by a desire to find cheaper accommodation, due to their lower income expectations.

    Another factor impacting local markets is the accelerated supply of government-subsidized housing, which has helped stabilize prices of privately owned rental properties.

    In 2023, the Ministry of Housing and Urban-Rural Development pledged to “significantly increase” the supply of affordable rental housing nationwide by adding 3.6 million homes, either through construction or by acquiring stock from private property developers, including public housing and shared ownership housing.

    By the third quarter of 2023, 72% of the 2.04 million subsidized housing units to be built as part of the national plan had been completed, according to the ministry. It added that the total amount of subsidized housing units stood at 5.65 million at the start of this year.

    First-tier cities aimed to construct or acquire at least 70,000 units in 2023, while many second- and third-tier cities implemented their own plans based on local demand and conditions.

    Subsidized housing can have a significant influence on the overall market, too. An analysis by the China Real Estate Information Corp., a digital services platform for the industry, found that the rental prices of private-owned homes in Pujiang Town, Songjiang New Town, Zhoupu Town, and Kangqiao Town — the areas of Shanghai with the highest concentration of government-subsidized rental properties — had fallen by more than 3.5% year on year as of November.

    Despite the short-term impacts of lower income expectations and increases in subsidized housing, market insiders and observers are predicting a market rebound amid China’s economic recovery.

    A version of this article originally appeared in Shanghai Data, a platform operated by the Shanghai Observer. It has been translated and edited for brevity and clarity, and is republished here with permission.

    Translators: Chen Yue and Xue Ni; editors: Xue Ni, Luo Yahan, and Hao Qibao.

    (Header image: A residential area in Shanghai, Nov. 6, 2023. Wang Gang/VCG)