**Recent Hype Over “Old and Small” Houses in Shanghai Sparks Controversy**
In a recent report by mainland official media, there has been a buzz surrounding the promotion of “old and small” houses in top-tier cities like Shanghai. A broadcast by Shanghai Television has stirred up a storm on the internet, attempting to showcase that Shanghai’s “old and small” (referring to old public housing) properties are becoming highly sought-after and a new trend of “buying houses for renting out, seeking high rental returns” is emerging. However, the exaggerated examples and methods of calculation in the report have drawn collective mockery from netizens, accusing the official media of turning news into entertainment.
Despite the continuous downturn in the Chinese real estate market, some official media outlets have started shining the spotlight on the lower-priced “old and small” houses in an attempt to create a lively trading atmosphere.
According to a report by First Financial on November 25th, the latest data from institutions indicates that in the second-hand housing market of first-tier cities like Beijing and Shanghai, lower-priced properties below 2 million yuan have become the “main force” of transactions, with Shanghai leading at 48.72% of transactions in this price range. Young people who once shouted “escaping from Beijing, Shanghai, and Guangzhou” are now investing 2 million yuan to bottom fish in the “old and small” houses in Shanghai.
A recent report by Shanghai Television further points out that historically, the proportion of transactions below 3 million yuan in Shanghai’s second-hand housing market has been around 40%. Since the second half of this year, a new trend has emerged in this market of “buying houses for renting out, pursuing rental returns.” The rental returns of Shanghai’s old public housing have increased, especially with many people flocking to Shanghai’s property market to buy old public housing and then rent it out.
Interviewed intermediary Wu Hongwen told Shanghai Television, “In the process of our transactions, there are two or three clients who don’t actually visit the house, they only check out the surrounding neighborhoods and facilities, look at the layout and building, and then make a decision.” The report mentioned that these “sight unseen” transactions make up about 30% of the store’s total sales volume.
The report claims that these customers buy old public housing with full payment and solely for rental purposes, focusing on the annual rental yield. The rental yield refers to the ratio between the annual rental income of the property and the total property price, with a higher ratio indicating a higher investment return rate.
After this news was aired on their Weibo platform, the comments section was filled with numerous netizens ridiculing the report, stating, “It’s quite laughable, turning news into entertainment!”
One of the criticisms from netizens is the practice of “buying without looking” – merely checking the surroundings briefly and completing the transaction within a week. For high-value asset transactions such as real estate worth millions, this extremely hasty behavior is highly unusual among regular homebuyers, raising skepticism about its authenticity.
Many netizens expressed doubts, asking, “Does anyone really buy a house like this? Even for items over 1.5 million yuan, don’t people try them on before purchasing? The news, lacking comprehensive cost analysis, inflating rental income, and using exaggerated home-buying cases, is unconvincing. For ordinary investors, in the current market environment, purchasing any property, especially less liquid old public housing, should prioritize the risk of price declines (capital loss) over rental returns.
Shanghai Television’s report states that these customers are all buying old public housing, primarily paying in full, and all for rental purposes. They are focused on the annual rental yield. For example, Ms. Shen is interested in a 50+ square meter property priced at over 1.6 million yuan, with a monthly rental yield of 4,500 yuan, resulting in an annual yield rate of over 3.3%. In comparison, the one-year deposit interest rate of a state-owned major bank is only 1.1%, and 1.55% for a three-year term.
A Shanghai resident questioned, “Why would someone selling a house want to sell it? Why not rent it out? If the return rate is so high, why would the landlord be willing to sell the house? Wouldn’t they rather keep it for such high returns? Just like many times when businesses close, with a sign outside saying ‘store for rent.’ Would a thriving store really shut down? Can’t they continue? Can they transfer ownership?”
Many netizens agree with the view that the sellers’ behavior itself confirms a pessimistic outlook on future rent and housing price trends.
Another Shanghai resident sarcastically commented, “Let’s respect those who are doing charity work.”
In the context of falling housing prices and general decline in rental rates, the sudden reporting by official media on a new trend of “buying old public housing for renting out to earn money” has been interpreted by many as mere market “support” or “bullish” propaganda for the real estate market rather than genuine market observation, leading to a loss of credibility. The news contrasts the 3.3% rental yield rate with the state-owned major bank’s 1.1% (one-year term) and 1.55% (three-year term) deposit interest rates, emphasizing its attractiveness. However, this comparison represents an unequal risk scenario.
A netizen remarked, “Nowadays, Shanghai TV’s news programs seem to have become entertainment shows. No wonder nobody watches the news anymore.”
A prominent Shanghai figure, “Master Mei,” also shared his thoughts on the matter. He mentioned, “In Puxing Road in Shanghai’s Pudong area, old public houses are usually around 50 square meters, costing over 1.5 million, at a unit price of around 30,000. To get a monthly rent of 4,500, where can you find such a gullible person? Even if there are such gullible people, it’s not a universal scenario.”
“Master Mei” further pointed out, “A house that can’t be rented out for 4,000 yuan a month, should consider itself fortunate if it can be rented out for 3,800 yuan a month. The precondition is that the house’s renovation is decent. With this rushed house-buying behavior without even seeing the house, not considering transaction costs (currently, agent fees in Shanghai are 2%, deed tax is at least 1%, totaling over 3%. Additionally, there are other miscellaneous expenses like renovation costs), and also having to pay taxes. Nowadays, everything requires taxes and registration. These initial costs immediately lower the actual initial return rate. So saying a return rate of over 3.3% is just a pipe dream.”
“Master Mei” also highlighted, “The likelihood of buying something over 1.5 million this year and its market value being 1.5 million next year is very high. Once the price drop exceeds the annual rental income, the so-called ‘high return rate’ instantly turns into ‘negative return.'”
In reality, the latest official data reveals the severity of the market: the National Bureau of Statistics of the Communist Party disclosed that from January to October this year, the national sales area of newly constructed commercial housing decreased by 6.8% year-on-year, with sales falling by 9.6%.