In China, an increasing number of middle-aged people are choosing to rent homes, with some even selling their houses and opting for renting.
According to a set of data released by the Beike Research Institute, a research organization focusing on China’s internet and existing home market, in 2023, among the 40 key cities in China, the proportion of tenants aged 35 and above exceeded 35%, showing an increase of 4% to 6% compared to 2021. In first-tier cities like Beijing and Shanghai, the proportion reached 45% and 40% respectively. Furthermore, when including the age group above 30, middle-aged people accounted for over 55% of the entire rental market, while the proportion of young people aged 30 and below, who are usually considered the “main force” of renting, continued to decrease to 45%.
The data also revealed that the share of three-bedroom apartment leases reached 27.2%, surpassing one-bedroom units for the first time. In first-tier cities, the proportion of leasing well-decorated properties exceeded 70%, nearly a 10% increase from 2021. This growth in the proportion of middle-aged people renting homes is primarily on a family basis.
“Sale of houses for rent” has become a notable trend. According to a survey cited by Wu Xiaobo Channel on November 9th, a Chinese financial writer, many new rental households may own their own houses, with some even having purchased houses at the peak of property prices and interest rates after 2018. They list their own properties for sale and then seek better located properties with improved supporting facilities.
Wu Xiaobo Channel believes that one reason for the trend of “selling houses to rent” is that, under the premise of asset depreciation, the insecurity of carrying a mortgage outweighs the instability of not having a fixed place to live. Starting from 2022, housing prices in China began to decline. In December 2023, first-tier cities experienced three consecutive months of decline. The devaluation of core assets reflects the drastic fluctuations in the macroeconomy, exacerbating residents’ sense of insecurity and undermining consumer confidence. If homeowners have a huge mortgage debt and face unemployment, it could be a disaster for an average family. Therefore, reducing leverage and cashing out provide a sense of security.
Furthermore, the rental market is witnessing a continuous decline in rental prices. In 2023, residential rents in the top 50 cities across the country dropped slightly by 0.3%, which increased to 0.9% in the first half of 2024. Over the past year, rental prices in first-tier cities have continuously decreased, with rents in Beijing and Shanghai falling by 5.94% and 5.15% respectively year-on-year. Data from the E-House Research Institute showed that in June of this year, the average rent in Shanghai hit a new low since 2019. By August, the rent-to-income ratio (monthly rent/monthly income) decreased by 15% compared to 2022, significantly reducing financial pressure on tenants. The decline in rents has led many people to consider the substantial costs of leveraging to buy homes, as currently, a loan of 1 million RMB is equivalent to paying nearly 1 million RMB in interest; selling off a house and depositing the cash in a bank helps offset most of the rent with interest.
At the same time, as the “interest spread” between mortgages and rents continues to widen, renting is seen as more cost-effective compared to taking on a mortgage to buy a house.
Wu Xiaobo Channel believes that the high probability of a sustained high supply of rental housing will continue in the coming years. In an era with poor real estate liquidity, it is laying the foundation for the expansion of the rental housing market. In the medium term, landlords will choose to “rent instead of sell,” meaning a large number of vacant properties that were originally profitable to sell will be put into the rental housing market.
However, Wu Xiaobo Channel also expressed concerns about China’s rental housing market, as China lacks robust tenant protection policies like Western countries. Tenants in China often fall victim to landlords arbitrarily terminating contracts or hiking rents. It is suggested that China should quickly improve its rental housing market policies to protect this vulnerable demographic group, learning from Western countries.
The release of this news has resonated with many Chinese netizens.
“Slowly becoming wealthy 6666″ commented: ” ‘Selling houses for renting’ has become a significant trend. Facing a huge mortgage debt, once unemployed, it could be a disaster for an ordinary family. Therefore, reducing leverage and cashing out provide a sense of security.”
“Ziyu” shared: “Since housing prices have long exceeded the affordability of most people, renting in first and second-tier cities has become the norm. In times of economic downturn and unstable income, it is wise to reduce unnecessary risks!”
Netizen “The Heir of the Dragon Laughing at the World” expressed: “In cities where housing prices exceed 6,000 RMB per square meter, it is recommended that people with an annual income lower than 200,000 RMB sensibly choose to rent. High housing prices and the substantial costs of raising children require a lot of money.”
“Bian” advised everyone: “Friends, don’t put too much pressure on yourself. Renting a house for a lifetime is also fine. Health and safety are the most precious.”