China Govt Rental Property Push Seen Key Growth Boost Next Yr

--Rental Housing Development Latest Variant on Government Stimulus 

--China Govt Sees Rental Housing Solving A Number of Problems At The Same Time

     BEIJING (MNI) - The Chinese government is betting that development of the

residential rental property market will mitigate the many serious challenges

facing the domestic property market while providing a boost to economic growth

in coming years, property market experts told MNI. 

     In a twist on the Chinese government's oft-used policy of boosting

infrastructure investment whenever economic stimulus is needed, China appears to

be counting on a rental housing boom next year. 

     At the 19th Communist Party Congress last month, Chinese President Xi

Jinping touted the development of the residential rental property sector as a

way to curtail speculation in the domestic property market and put a lid on

price increases that are making housing increasingly unaffordable for China's

growing middle class. At least 48 cities in China have issued policies in

support of development of the sector. 

     "The campaign will definitely influence investment growth," Yi Xianrong, an

outspoken property expert and former researcher at the government-backed Chinese

Academy of Social Sciences (CASS), said in an interview with MNI. "The

government wants its new rental market policies to guarantee investment growth,

ensure housing prices don't rise too rapidly and, at the same time, tackle

people's housing problems."

     China International Capital Corporation projected that the development of

the rental market would provide a significant boost to China's economic growth. 

     The investment bank estimates China's economic growth this year will

average 6.8%, accelerating to 6.9% in 2018 due to robust property investment as

well as strong growth of consumer spending and manufacturing. CICC said the

construction of rental housing units would boost property investment growth by

10% to 15% in 2018, much higher than the 8% to 9% growth estimated for this

year.

     The rental property initiative has gained momentum since its start in July.

By the end of August, 13 large cities were part of a pilot project, allowing the

use of collectively owned land to be developed for rental housing units.

     The development of the rental market means an increase in investment and so

a boost to growth, Yi, who is now an economics professor at Qingdao University,

told MNI. 

     The current rental market campaign is being led by state-owned enterprises

(SOEs), which have better access to government funds and bank lending than do

private developers. In a boost to investment, the SOEs are building new rental

housing units rather than repurposing existing inventories of private housing

units.

     The rental market policies will have little negative impact on China's

private property sales because the scale of rental housing projects is still

tiny compared with the size of the private market, Yi noted. 

     Yan Yuejin, director of E-house Real Estate Research Institute, told MNI

the rental market movement would not change the total amount of property

investment and housing starts since overall housing demand would not change. The

impact is more on the structure of investment, with some transferred to the

rental segment from private development, he said.   

     But Yan, unlike Yi, believes the development of the rental market could

cannibalize some private housing sales, as people who had planned to buy houses

may instead rent a house or apartment under the policies that will make renting

cheaper.

     Chinese property sales have already slowed since mid-March, when the

government started a second round of tightening measures on the sector to rein

in surging price growth. According to the National Bureau of Statistics,

property sales in the first nine months of this year were 2.4 percentage points

lower than in the first eight, implying a significant slowdown in September,

though the growth rate was still 10.3% year-on-year. 

     With Xi and other officials stressing their view that "houses are for

living in, not for speculating on," the development of the rental housing may

help provide a boost that is expected to offset some of the negative impact of

government policies meant to curb housing price growth.

     Yang Xianling, head of the research department of Lianjia, China's largest

real estate brokerage company, told MNI he expects the residential rental

property market would contribute CNY2.6 trillion, or 3.3%, of the expected

overall growth in China's GDP of CNY79 trillion this year. 

     He did his own calculations based on the targeted rental units various

cities are planning to build, measuring their land transaction costs, renovation

expenses, and the driving effect on sectors such as cement, steel, construction

materials, furniture, home appliances, transportation and human resources.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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