Rents in first-tier cities are falling, and the era of landlords lying flat to collect rent is over

Author: Ma Yifan

In the past, investing in a few houses and lying flat to become a "charter wife" was the dream of many urban workers. However, now many landlords in first-tier cities are beginning to face the dilemma of vacant houses and rent dropping by 1,000 yuan.

According to this market, it is estimated that the annual rent income will be less than 20,000 yuan. Recently, a landlord in Shanghai told reporters. The days of institutional "second landlords" are no longer easy, and due to the pressure of corporate survival, some large housing rental companies experienced large-scale layoffs and renegotiated contracts with landlords at the end of last year.

In addition to the weakening demand for rental housing at the end of the year, the large-scale concentration of rental housing in the market is also profoundly changing the pattern of the rental market.

The rent has dropped by 1,000 yuan, but no tenants can be found

Zuo Wen, who is in his 40s, has been working hard in Shanghai for nearly 20 years, and in the past five years, he has bought two apartments, one of more than 120 square meters for self-occupation, and one for his husband's house with an area of about 50 square meters, for rent.

In this way, Zuo Wen became a "landlord", his husband's house is only about two kilometers away from the core area of Lujiazui, a one-room household, the monthly rent can reach 6500,78000 yuan in the past, and the rent can be <>,<> yuan a year.

"Because of the location of my house, it used to be rented out and almost never vacant, but now the situation is different. Recently, Zuo Wen told reporters that the original tenant moved out in the fourth quarter of last year, and he put the house on the list for rent, but he didn't expect that no one cared for a month. After that, he lowered the monthly rent by 500 yuan, but he still couldn't rent it, and now the listed rent has dropped to 5500,<> yuan per month.

"Even if I can rent out the house this month, compared to the previous reduction in rent, plus the vacancy period, I will probably lose more than 20,000 yuan of income a year. Zuo Wen said.

Zuo Wen's situation is not unique, since the second half of last year, many Shanghai landlords have felt that their houses are not good to rent out.

An intermediary broker serving the old Jing'an area told reporters that he had a two-room old house on hand, the price of 8500,6500 yuan/month before, and it could be rented out quickly after the line, and the tenant moved out in advance before the end of the contract at the end of last year, and the house began to be empty.

Wang Xuewei is a white-collar worker from a foreign company who has been renting a house in Shanghai for many years, and she feels that from the second half of 2022, the rent will have a downward trend. In the second half of 2023, Wang Xuewei will move again, and the rent of a house in the same location and similar quality will be reduced by 500 yuan/month, which can save 6000,<> yuan a year.

Can individual feelings in the rental market reflect the real market temperature? From the data side, there has been a wave of general decline in rental prices across the country, and the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen were the strongest in the market, but this round has led the decline.

According to a report released by the China Index Research Institute on January 1, the average residential rent in the country's 8 key cities will fall by 2023.50% in 0, and the rent has risen seasonally after the Spring Festival and in the graduation season, but weakened again in the fourth quarter.

According to the housing big data monitoring system cooperated by the Weifang Research Institute, Beike Research Institute and other institutions, as of the end of the third quarter of 2023, the housing rent index in the key 40 cities was 100.06, a decrease of 0.99% compared with the end of the second quarter, and a decrease of 2022.0% compared with the end of the third quarter of 66. Housing rents in Shanghai fell by 2.1% quarter-on-quarter and 2.9% year-on-year at the end of the third quarter, Beijing and Guangzhou fell by 1.28% and 1.32% respectively in the third quarter, compared with the end of the third quarter of 2022, although the housing rents in the two cities fell slightly but were basically flat, and the housing rents in Shenzhen also fell by 0.93% in the third quarter.

The drop in rents reflects the lack of demand in the rental market, and the "second landlords" of some institutions are not having a good time.

Recently, an insider of a large housing rental service company told reporters that the company carried out a wave of layoffs at the end of last year. The company's business model is to absorb the properties in the hands of ordinary landlords, and put them into online platforms for rent after unified renovation or repair, that is, the typical institutional second-hand landlord model, and by the second half of 2023, the overall air clearance rate has reached the highest in the past three or four years.

In addition to the layoffs, the company's housekeeper is also renegotiating with individual landlords, asking them to understand the company's current operating difficulties, increase the vacancy grace period, or agree to lower rents that have been contracted in the past. The above-mentioned person said.

There are multiple reasons for the general decline in rents

Lu Wenxi, a senior analyst at Shanghai Centaline Real Estate, said that judging from the rent index monitored by Centaline Real Estate, the decline in housing rents in the fourth quarter of 2023 did exceed that of the same period in previous years.

"Originally, the rent index would fall in the fourth quarter of each year, which is normal, because the fourth quarter itself is the off-season for renting, but it does fall more in 2023. He said that there are many reasons for the decline in rents in first-tier cities.

He believes that the root cause is the lack of rental demand due to population movement, and in addition, there is a certain relationship between rent and housing prices, and as housing prices fall, rents naturally fall.

Judging from the data, the decline in housing rents is indeed the same frequency as the decline in housing prices. According to the National Bureau of Statistics, in November 2023, housing prices in 11 large and medium-sized cities continued to decline, of which the price of new homes in first-tier cities fell by 70.0% month-on-month, and the price of second-hand homes fell by 3.1% month-on-month, and Beijing, Shanghai, Guangzhou and Shenzhen decreased by 4.1%, 4.1%, 5.1% and 0.1% respectively.

Some analysts believe that in the context of high listings, second-hand houses are more difficult to sell, so many landlords temporarily choose to "sell and sublet", resulting in more listings entering the rental market and lowering prices.

In addition, Lu Wenxi believes that the concentration of a large number of rental housing has completely changed the pattern of the housing rental market.

Taking Shanghai as an example, since 2017, Shanghai has sold 222 rental housing plots, with a total construction area of nearly 1900 million square meters, providing more than 25,<> rental housing units, most of which are affordable rental housing.

These rental housing projects have good locations, new looks, and reasonable prices, and are more popular with renters than individual or second-hand landlords.

According to the statistics released by the Shanghai Municipal Housing Authority, Shanghai's rental housing projects are distributed in 16 administrative districts and the Lingang New Area, of which about 61% are located in the central urban area, 39% are outside the outer ring, and 42% are newly built projects in the central urban area and 58% are outside the outer ring. Nearly half of the land supply is planned to be located around the rail transit station, and eighty percent of the land plots cover various universities and scientific research institutes, science and technology innovation parks, industrial clusters, commercial and business clusters and other areas where rental demand is concentrated. In terms of room design, these rental housing projects focus on small apartments, such as one-bedroom units, one-bedroom apartments, two-bedroom households, two-bedroom apartments, etc., which can meet the needs of new citizens and young people for living space in different periods of entrepreneurial development and life improvement.

"This year, Shanghai's rental housing and talent housing have been concentrated in the market, which has obviously absorbed a lot of demand, and there are many fewer tenants renting individual landlords' houses. Lu Wenxi said.

A person from a large housing rental company also told reporters that this year's Central Economic Work Conference proposed to speed up the construction of affordable housing, and major cities are speeding up the promotion of relevant work in the near future, and the future of affordable housing will become more and more abundant. "I am in this industry, and I also have a sense of crisis, if I hope that this industry still has value, then we must improve the quality of housing and improve services, otherwise we will be eliminated from the market. ”

(At the request of the interviewee, Zuowen and Wang Xuewei are pseudonyms in the article)