One of China’s largest property developers, China Vanke Co, refuted media reports that the entrance of institutional landlords has led to current soaring rental prices. “It is not until the past two years that large companies started to emerge in the traditional leasing market, but the penetration rate is less than 5% in China, which is too small to have a significant influence,” Vanke President Zhu Jiusheng said. Large real estate brands are acquiring rental homes on a large scale, substantially pushing up leasing prices. According to a report by china.com.cn, rents in 13 major cities have increased by over 20% in the past year, especially in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen.

Many leading property developers recently have regarded the rental sector as a core business and a key driver in the future. Taking Vanke as an example, it has acquired more than 160,000 rooms for rent in 30 cities and a quarter of them were on the market by the end of June. Zhu said the company included rental housing as one of its core businesses in 2018, saying the source of its apartments was mostly from building projects on land which is restricted to rental-only properties by the government, other firms’ idle resources, and personal properties.

Meanwhile, Country Garden Holdings announced that it has 24,000 long-term rental apartments in total, 21,000 of which are still under construction, and the aim is to launch 1 million units in three years. It is reported that some apartment rental platform operators offer 20% to 40% higher than normal market prices to house owners in order to acquire more apartments to increase rental prices. However, Pan Shiyi, Chairman of SOHO China, noted it would still be a loss to invest in the longterm leasing sector even if the current rental price doubles. The rate of return in China’s rental market has been low in the long term. In the second quarter of 2018, it was just 2.6% in China’s 50 biggest cities, a year-on-year decrease of 6% according to the E-House China R&D Institute. Liu Weimin, Researcher at the Development Research Center of the State Council, said there were multiple factors behind the soaring rents. “The critical reason is a supply shortage, especially a lack of high-quality resources,” the China Daily reports.

Rents in Beijing have risen 25.8% compared to last year, with July rent alone 4.3% higher on a monthly basis. Rent for a 50-square-meter one-bedroom apartment built in 1980 in Xuanwumen, 2 kilometers from Tiananmen Square, is over 8,000 a month, while earlier this year, the rent was CNY6,000 per month. The average monthly income in Beijing is CNY8,467.