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China's Guangzhou offers incentives to boost home rental market

Published 07/19/2017, 03:36 AM
Updated 07/19/2017, 03:36 AM
© Reuters.  China's Guangzhou offers incentives to boost home rental market

© Reuters. China's Guangzhou offers incentives to boost home rental market

BEIJING (Reuters) - The southern Chinese boomtown of Guangzhou has announced a flurry of incentives to boost its home rental market as a year-long property boom makes new housing less affordable.

The move comes as China's government spearheads a drive to support rental supply to help rein in hot property prices and satisfy housing demand.

While property prices have shot up, driven by speculation and demand from a growing middle class, China's rental market has long been underdeveloped and largely remained unregulated, with rental yields easing to multi-year lows.

Guangzhou, one of the country's biggest cities, is offering a host of sweeteners for renters including equal education access, tax cuts and monetary support.

Children of tenants, many of whom are migrants working in the mega-city of 14 million people, will be given the right to attend a school near the rented property.

Home ownership is a key requirement in China's school allocation system, as policies dictate school enrolment to be largely determined by the location of the student's home. It has led to sky-high property prices in better school districts.

The city also slashed and even eliminated value-added taxes in some cases for registered companies and individuals operating or involved in the residential rental business.

The details were released by the city government late on Monday.

The steps drew both praise and brickbats in online media, with some critics saying the measures would only fuel rental prices.

"This is a major policy bonus for property speculators," commented one person who used the handle "Fighting" on China's popular social media platform Wechat.

"In absence of a property tax, it still means property owners will get richer - they don't have to worry about selling anymore, they can just rent for big profit," another person named "Boe" commented.

Like many other big Chinese cities, Guangzhou has rolled out various property curbs since early last year to drive out speculators, including banning buyers from reselling newly bought properties before holding them for two years.

Still, Guangzhou's new home prices in June rose 17.8 percent from a year earlier.

Conversely, the rental yield in all of the country's first-tier cities - Beijing, Shanghai, Guangzhou and Shenzhen - has fallen below 2 percent, according to Shanghai-based E-house China R&D Institute.

In some cases, owners who are hoping to make big capital gains prefer to keep apartments empty, rather than taking the trouble to let them out, which further limits supply in the rental market.

Advertisements posted on Fang.com, China's biggest real estate website, showed renting a bedroom in a typical two-bedroom home in Guangzhou would range between 2,000 yuan ($296) to 3,000 yuan per month.

A report by government-backed Southern Talent Market showed the average monthly salary in Guangzhou was 6,954 yuan ($1,029) in 2016.

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