Many tenants in Beijing are facing rent increases this summer, forcing them to move to cheaper accommodation further away form the city center and necessitating a longer commute to and from work. One typical example is a rent of CNY5,386 a month in April, rising to CNY6,100 a month in June. As the central government has acted to control housing prices in previous years, real estate agencies have shifted their focus from the selling to leasing business, which appears to be more profitable. In Chinese cities, agencies buy or rent apartments from individuals or landlords. They then restore the apartments in a similar style to build up a brand and to rent to tenants. The agencies profit from the difference in price and also charge management fees to both sides.

As these agencies, including Ziroom, YOU+ and MoFang Apartment, have gained billions of dollars in investment and grown rapidly in the past two years, they have expanded their market share by buying a large number of apartments. This helps them to monopolize the market and raise rents. Xia Lei, Deputy Director of the Evergrande Research Institution, co-established by the Evergrande Real Estate Group and Tsinghua University, said capital the agencies have raised has played an important role during the latest round of rent increases. “The investors urgently want to start making money which will inevitably lead to soaring rents,” Xia said. “Rapid rent growth will affect people’s living quality and willingness to consume, which will damage a city’s competitiveness and attraction.” Xia said the government should intervene in the rental market and regulate the industry.

The Beijing Municipal Commission of Housing and Urban-Rural Development instructed agencies in August not to use bank loans to buy apartments or to pay higher than market prices to acquire apartments to rent out. Ziroom promised to provide 80,000 apartments from its stock to the market. According to the agencies, the major reason for the rent rises is a supply shortage. The demolition of illegal buildings and a prohibition on co-renting to prevent safety risks has led to a reduction in supply. In the past year, Beijing has torn down 59.85 million square meters of illegal construction and plans to demolish another 40 million sq m this year. On the other hand, the city’s overall salable area of apartments in the past year was 8.75 million sq m and its affordable housing area was 2.67 million sq m. Beijing’s total floor space for residential buildings is 882 million sq m. According to RealData, the average rent in Beijing in the first seven months of this year grew by 10.7% year-on-year.

According to China Economic Weekly, up to 13 first- and second-tier cities in China saw rent increases of more than 20% in the past year. Chengdu, capital of Sichuan province, ranked top with a rise of 30.98% on average, followed by Shenzhen in Guangdong province with rent growth of 29.68%. Rent increases in Beijing and Guangzhou, capital of Guangdong, also surpassed 20% year-on-year this month, the China Daily reports.

China Evergrande, China’s third largest property developer by sales, posted a 101.5% surge in first-half core profit to CNY55.01 billion, while revenue rose 59.8% to CNY300.35 billion on the same period last year. Contracted sales in the first six months of the year increased by 24.6% year-on-year to CNY304.18 billion, accounting for more than half the company’s annual sales target. Evergrande CEO Xia Haijun expects that over the next three to five years, the country’s top 10 developers will account for 40% of the whole market while the top three – Country Garden, Vanke and Evergrande – will account for around a fifth of all sales. Of the 12 of Hong Kong-listed Chinese developers that have released half-year results, only one missed estimates.