TAIPEI, TAIWAN — Housing rents have been declining in major Chinese cities amid slowing economic growth and rising youth unemployment, a trend that could further weaken the real estate market and hinder economic recovery.
Rents in Beijing, Shanghai, and Shenzhen last year fell to levels last seen between 2015 and 2017, while Guangzhou saw a drop to 2014 prices, Chengdu to 2018 levels, and Tianjin to rates last recorded in 2010, Trigger Trend, a Chinese financial media outlet and business service provider, said in an report published Sunday (Feb. 23), citing data from Wind Information.
The report also cited data from China Indices, indicating that across 50 major cities, average rents fell by 2.72% cumulatively from January to November 2024.
The downward trend has persisted this year, with average listing rents in 40 cities declining by 1.2% month-on-month in January. Meanwhile, the average listing time rose to 51.9 days, an increase of 6.9 days from December, indicating that lowering rents to boost turnover is proving ineffective in the current market, the report said.
Low in demand, high in supply
The slump was driven by the introduction of affordable housing by the Chinese government last year, along with declining incomes, the report said.
The decline in rents does not seem to make housing more affordable. A survey by China Indices found that 60% of respondents planned to move, with many opting to downgrade to cheaper housing.
Another main reason for the reduced rental market demand is the high youth unemployment rate, according to a recent report from Sanlian Life Weekly.
The unemployment rate for young people aged 16 to 24 in China neared 19% in August last year, prompting more to move back home and rely on their parents to reduce expenses, the report said.
While demand declines, supply continues to rise. Many homeowners are choosing to rent out their properties rather than sell at low prices, while some investors are entering the rental market to generate extra income amid the sluggish economy, the report said.
“People won’t stay in cities for long without stable income or job opportunities,” said Li Hengqing, an economist who directs the U.S.-based Information & Strategy Institute. “They will look at other ways to address their short-term housing needs without signing long leases — it’s a reflection of the poor economic situation.”
Hsiao Tu-yuan, Secretary-General of the Cross-Strait Policy Association in Taipei, said the Chinese government’s urbanization policies aimed at improving living standards in third- and fourth-tier cities are drawing a lot of young people back to their hometowns in search of job opportunities — another factor behind falling rents in bigger cities.
Low rents weigh on housing prices
When young people can no longer hold onto a bright vision of their own future, structural downward adjustments in local wages coupled with bleak job opportunities mean that investors lose confidence in the real estate markets in those cities, Hsiao said.
“When rents fall, when landlords feel that investing in first-tier cities is no longer a good bet, they will pull their money out, which puts even greater economic pressure on these first-tier cities,” Hsiao said. “And local governments will find it harder to issue bonds to raise funds for infrastructure, because people won’t have a positive view of development prospects.”
The outlook for China’s real estate market remains bleak despite the government’s stimulus policies such as purchases of unsold homes, according to a Reuters poll of 10 analysts from Feb. 12-24.
The analysts expect that “the stabilization of China’s property market will be a protracted process” due to high housing inventory, bearish demand and a long-term population decline, the report said.
In 2025, home prices were expected to fall by 2.5% year-on-year, a faster pace than the 2% previously estimated, and pick up by 1.2% in 2026, a pace slower than November’s forecast of 1.6%, and climb 2% further in 2027, the report cited the poll as saying.
China’s stimulus measures “in the wrong direction”
The Chinese government has rolled out a number of stimulus measures since last year, with some analysts expecting more to be introduced during the upcoming National People’s Congress.
But analysts told Voice of America that they may not be very effective.
The government’s ongoing loose monetary policy will only fuel the public impression that the economy is in trouble, making them more likely to save up than invest, putting a drag on economic growth for some time to come, Hsiao said.
Hui Ching, Vice Chairman of the Institute of Future Cities at the Chinese University of Hong Kong, said the biggest problem with the government’s market-stabilizing policies is that they go “in the wrong direction.”
China’s labor force is shrinking due to the country’s demographic changes, so the government should focus on boosting the median disposable income rather than pursuing overall economic growth, he said.
Currently, the median disposable income of Chinese citizens accounts for about 30% to 40% of the total economy, far lower than the 60% to 70% proportion seen in economies with strong sustainable domestic demand, such as the U.S., the U.K. or Hong Kong, Hui said.
In a situation where people have no money in their pockets, blindly chasing economic growth is clearly unhelpful in stimulating consumption or truly boosting domestic demand, and cannot deliver the “dual circulation” economy that the Chinese government is hoping for.
“I think this economic weakness will persist; it has gotten into a vicious cycle where foreign direct investors aren’t optimistic about China’s development model,” Hui told VOA. “Wages are falling, and there may even be a risk of deflation.”
“To put it bluntly, China’s economy has already lost too much blood to function properly,” he said.
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