BOFIT Viikkokatsaus / BOFIT Weekly 2018/35

Various market operatives report that rents, particularly in China's biggest cities, soared over the summer. A study by Chinese real estate brokers further shows that July rental prices in Beijing were up on average over 20 % y-o-y. Rents climbed by nearly 40 % in some areas.

China's rental markets are generally considered underdeveloped. Most people own their own apartment. Soaring rental prices have pushed the government in recent years to make renting more attractive. Beijing's rental market is currently dominated by a handful of brokers and tenant rights are inadequate e.g. in resisting capricious rent hikes.

As of mid-August, rental brokerages in Beijing agreed jointly to constrain the rise in rents by offering 120,000 new apartments on the rental market and refrain from cynical bidding wars. Media reports claim that rental brokers have lately promised apartment owners high rental prices to capture apartments to their own listings. Beijing rents are the highest in China, currently an average of about 92 yuan (13 euros) per square metre.

The higher rents have yet to show up in official inflation statistics. The rental expenditure category of the consumer price index shows rents even in big cities rising at a steady pace of 2–3 % a year in recent years. In the worst case, the failure of the government's methodology for calculating inflation in capturing large increases in rents or housing prices leads to improper dimensioning or timing of policy actions.