China Adds Rental Homes to Property Policy

Ensuring a steady supply of new homes will be the primary goal of China’s property-market policy in the years to come.

This is one of the key takeaways from the Central Economic Work Conference which ended Wednesday. The government will step up efforts to encourage developers to build more rental homes, and will allow greater flexibility in how land is used to better respond to housing demand. The aim is to stablize home prices by controlling the supply.

This policy of relying on both purchases and rentals to meet the country’s housing needs is vastly different from the government’s focus on home ownership over the last few decades, said Zhang Dawei, chief analyst at Centaline Property.

"Overall, real estate regulations are undergoing crucial changes," Zhang said, adding that more detailed policies are set to be rolled out next year.

The conference also called for developing the ‘long-term’ rental housing market, to protect the rights of all parties and to foster the development of a professional market, according to the state-run Xinhua News Agency.

Yan Yuejin, research director at E-house China R&D Institute, predicted that the rental housing market will grow rapidly over the next three years. Yan said one way could be banks buying existing homes from property owners and leasing them out on long-term contracts. He added that usually ‘long-term’ means at least three years.

As leasing generates lower cashflow than selling, some industry executives said the government should enforce policies that support property owners issuing securitized products backed by the rental income from their properties.

According to a source and a document seen by Caixin, Chinese regulators — including the Ministry of Housing and Urban-Rural Development and the China Securities Regulatory Commission — convened a close-door meeting Thursday, with the aim of clearing hurdles facing the rental housing market and securitization of such assets. Some industry executives believe this is another sign that regulators are trying to support the development of the rental market.

In fact, some major developers, such as China Vanke Co. Ltd., have poured more resources into building up their rental home portfolios or have announced plans to do so.

China Young Professionals Apartments, a Chinese long-term shared-leasing apartment property manager, is a case in point. It debuted its quasi Real Estate Investment Trust on Dec. 14. Founder Gehong Wang said he is considering securitizing his properties on a large scale.

In 2017, China’s real estate market, a important driver for economic growth, has undergone significant changes as the governments ofmany key cities wheeled out a blizzard of regulations curbing home purchases to contain price growth. In November, year-on-year price growth of new home and existing home in 70 major cities edged down for 14 straight months, official data showed.

Contact Reporter Pan Che (chepan@caixin.com)