[sohu think tank]KUANG Weida: House Rents in Many Cities Has Been More Than 30% Personal Income, Why Is It Keeping Increasing?

At present, rents in first-tier cities have risen sharply. Among them, there are indeed long-term rental apartments such as ZIROOM, KE, DANKE, and MOFANG that rely on the power of financing capital to content the property, thereby increasing the rent.

According to the analysis data, there are more than 1,000 long-term rental institutions in the entire leasing market, accounting for about 2% of the market share, but the rent level has increased by 4%, so that the surrounding ordinary rental houses are also starting to increase rents because of an infectious effect.

Why do long-term rental apartments have to grab the property and increase the rent? It is indeed because our current rental-to-sales ratio is very large, resulting in a relatively low rate of return on leasing projects. Then, after renting a house, the leasing institution monopolizes the market, has pricing power for the rent, increases the return rate of its rent, and obtains the return it wants.

In addition, there are other reasons that have led to rising rents. For example, the number of low-end and mid-range houses is decreasing. In a city, 700,000-800,000 illegally built houses was demolished, and the supply was reduced by 20%-30%. These houses were originally designed to meet the needs of the middle and low-end people. Long-term rental apartments such as KE and DANKE offer mid- to high-end rentals because they also have value-added service modifications. This has led to the phenomenon that the middle and low-end groups cannot afford housing.

Another reason is that the work and residence do not match, and some are too far from the work, which is a structural problem. There are also seasonal-related reasons. For example, when graduates are looking for work in June and July, the demand for renting is large, and the demand for renting at the beginning of the school is also large. Of course, this may not be the main reason. In general, the reduction in the supply of low-end and low-end housing and the entry of long-term rental apartments are the main reasons for raising housing prices. Other factors’ influences are not great.

What I want to tell you is that our rent level is a bit low compared to the return on investment funds, but the rent level is already high relative to the income of low- and middle-income residents. The rent level of many cities accounts for more than 30% of the disposable income of low- and middle-income residents.

In foreign countries, if this ratio exceeds 30%, it will face the phenomenon of not affordable of renting. Generally speaking, European and American countries basically use 30% as the standard for rent, which means loans issued by banks, the monthly share of disposable income of mortgages must be less than 30%. If more than 30% is likely to default, it is impossible to issue loans.

But China's ratio can reach 50%. The Chinese people's ability to withstand higher rent is stronger than other countries, but if they exceed 50%, it must be at the limit and cannot withstand it.

(The author is the Director of the Center for Research on City and Housing Market of NADS, RUC.)