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Decades pass, yet real(i)ty bites hard
2018-05-15

A saleswoman (center) talks with customers at a real estate sales office in Huai'an, East China's Jiangsu province. (Photo by Zhou Changguo/China News Service)

About a decade ago, a TV series called Woju (meaning a narrow dwelling, like that of a snail) became a huge hit among Chinese audiences.

The series depicted how hard it is for young people working and living in big cities to buy an apartment in such places.

The series' popularity can be attributed to many reasons. One of the most important reasons was that most of the houses were indeed unaffordable for young people. So, the series struck a chord.

Aspects like having to save every yuan possible toward making the down payment for a house first, followed by allocation of a major part of income for monthly mortgage payments, reflected the reality of the day.

In order to repay housing loans, people became risk-averse and couldn't muster courage to change jobs. They sacrificed their life quality to save more. They were nicknamed house slaves who abandoned their dreams.

The key reason for deciding to buy an apartment is to overcome factors like unpredictability and uncertainty that shroud home rentals.

An acquaintance was once forced out of a rented flat in the middle of the night. She was sharing the flat with two other girls. As it turned out, she was ejected by the landlord who illegally changed the internal structure of the house to lease it to more tenants.

"The development of long-term rental housing is supported by such factors. The population inflow into big cities in East China is boosted by the expansion of service industries and robust leasing demand. Such demand is caused by the unaffordability of home purchases in first - and second-tier cities.

"Another reason is preferential policies by the central government. There are now principles like same rights for home leasing and purchases, and that homes are for living in, not speculative investments," said Chen Tiedong, director of Colliers' East China research division.

As at the end of 2017, Shanghai's permanent population of immigrants from elsewhere in China reached 9.73 million, having grown at a compound annual growth rate of 7.4 percent from 2.87 million in 2000, according to Colliers research.

During the period 2000-17, the annual net population inflow was about 400,000. The large size of the immigrant population has become a major source of demand in the rental housing market.

First-time homebuyers' average age has increased from 30 in 2013 to 34 in 2016, according to a survey on Beijing and Shanghai's leasing market by Chinese residential property agency Homelink. It projected the Chinese leasing market scale will expand from 1.1 trillion yuan ($173.5 billion) now to 2.9 trillion yuan in 2025, and further grow to more than 4.6 trillion yuan by 2030.

But the housing industry's current business model is yet to prove its profitability, said Zhou Jing, head of project sales, JLL Shanghai.

According to Zhou, the annual rent a landlord receives for an average apartment is merely between 1 percent and 2 percent of the apartment's selling price in Shanghai.

"The biggest challenge will be competition from new supply given the relatively limited pool of demand in the short term which may affect the operators' profit margin. An additional factor would be the scaling up of asset management staff capable of operating residential accommodation," said James Macdonald, senior research director of Savills China, a real estate service provider.

"The opportunities are that this is a relatively new territory with no large incumbents. So, new entrants are looking to wrest market share and build reputation. The possibility is also there to grow into other related niche segments such as student housing and senior housing from a residential management perspective."

If I were one of the millennials, I'd probably rent an apartment on a long-term basis, so that I can pursue my dreams without the burdens of home maintenance and housing loan repayments on my back.

  

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