Archival Image: Sales staff idle during the 2010 Beijing Summer Real Estate Trade Fair, held in Beijing, China, on June 25, 2010. (Photo by Feng Li/Getty Images)
[People News] Recently, reports of falling rents in major Chinese cities have been emerging. The Chinese financial media outlet "Zhigu Trend" described the rental market in key cities as having "returned to levels from ten years ago"—yet rental properties are still struggling to find tenants. Analysts believe that the decline in rent not only reflects difficulties in youth employment and pessimism about urban life prospects but could also further erode confidence in the real estate market, making economic recovery even more challenging.
Survey: Rents in Beijing, Shanghai, and Shenzhen Fall to Decade-Low Levels
According to Voice of America (VOA), the report published by Zhigu Trend on Sunday (February 23) cited data from Wind, indicating that rents in Beijing, Shanghai, and Shenzhen have fallen back to 2015-2017 levels, while rents in Guangzhou have dropped to 2014 levels, Chengdu to 2018, and Tianjin has reverted to 2010 prices.
Moreover, the downward trend has continued into this year. In January 2024, the average listed rental price across 40 cities nationwide dropped by 1.2% month-over-month. The listing period for rental properties has extended to 51.9 days, a sharp increase of 6.9 days compared to the previous month—suggesting that even lowering prices is failing to attract tenants.
The report also cited data from the China Index Academy, which showed that from January to November 2023, the average rent across 50 major cities had cumulatively declined by 2.72%.
Why Being a Landlord Is Becoming More Difficult. The report analyzed two primary reasons for the struggles faced by landlords: 1. Large-scale introduction of "Guaranteed Rental Housing" Last year, the Chinese government promoted state-backed affordable rental housing on a massive scale, diverting a significant portion of rental demand away from the private market.2. Weaker income expectations. In 15 provinces where net property income data was published last year, Beijing, Jiangsu, and three other provinces all reported negative growth—indicating that many residents are earning less than before and thus spending less on rent.
Despite falling rents, which theoretically benefit young renters, China Index Academy’s survey found that 60% of tenants plan to move to cheaper rental units, suggesting that many are "trading down" rather than benefiting from greater affordability.
The report sparked discussions online. A netizen from Fujian, posting under the name "Chang Le," commented: "Landlords with multiple properties are collapsing, while those without houses—how are they supposed to live?" Meanwhile, a Zhejiang netizen, "Xiong Er," lamented: "This is what a downward spiral looks like."
Analysis: Employment Pressure May Be the Key Factor Behind Falling Rents
An article published by Sanlian Life Weekly on Tuesday also pointed out that youth employment difficulties are a major reason behind the declining demand for rental housing. In August 2023, the unemployment rate for 16-to-24-year-olds in China reached nearly 19%. Many young people who can "rely on their parents" are staying at home instead of renting. Those who move out for work often opt for shared housing to reduce costs.
The article further noted that the decline in rent is closely linked to the current weak housing market. Many property owners, unwilling to sell at a loss, have shifted to renting instead. Additionally, investors who previously focused on property appreciation rather than rental income are now struggling with economic downturns and are forced to rent out vacant properties—leading to a surge in supply.
Li Hengqing, an economist at the Information and Strategy Institute in the United States, told VOA that China's rent-to-price ratio has long been higher than in other countries. In many large cities, the annual rent-to-price ratio exceeds 50—meaning a landlord would have to collect rent for over 50 years just to break even on their investment.
Under normal economic conditions, this should make buying a home more attractive than renting for younger generations. However, the rapid decline in rental prices highlights a severe lack of demand, leading to an oversupply in the market.
Li explained: "If you lack financial security or job opportunities, you won’t stay in a city long-term. Many people are now choosing alternative housing solutions or short-term rentals instead of signing long-term lease agreements. This is a clear indicator of China’s current economic struggles."
Similarly, Hsiao Tu-Yuan, Secretary-General of the Cross-Strait Policy Association in Taipei, believes that China’s sluggish economy and declining urban job opportunities and income are discouraging many from spending heavily on rent in major cities.
Rent Declines Weigh on Investment Returns: Scholars Warn of Increased Economic Pressure Across Regions
Additionally, Xiao Duyuan believes that the Chinese government is actively promoting "urbanization" to enhance living standards in third- and fourth-tier cities. Over the past two years, it has been observed that many young people, facing difficulties in finding jobs and high living costs, have chosen to abandon their cramped living situations in large cities and return to their hometowns for employment. This trend is another contributing factor to the decline in urban rents.
The issue arises when young people can no longer envision a bright future. The negative repercussions may extend beyond just falling rents; they also underscore the downward adjustment of local wage structures and the dismal employment opportunities, leading investors to adopt a pessimistic outlook on real estate investment returns in these cities.
Xiao Duyuan told Voice of America: "After rents decline, when landlords perceive that investing in first-tier cities no longer offers attractive opportunities, their withdrawal of funds will exert greater economic growth pressure on these cities. In the future, local governments will face even more significant challenges when issuing local bonds, as the general sentiment will be one of skepticism regarding development prospects."
Reuters: Chinese Housing Prices Expected to Decline Again This Year
Simultaneously, as financial media reported falling rents, Reuters released survey results on Tuesday indicating that, despite market expectations that the Chinese government's market rescue policies will stabilize the housing market next year, the outlook for China's real estate market remains bleak.
The survey, which interviewed ten analysts, concluded that due to excessive housing inventory, persistently weak demand, and a long-term population decline, "the recovery of the Chinese real estate market will be a lengthy process," and measures taken by local governments last year to acquire developers' unsold inventory have yielded minimal results.
Analysts forecast that housing prices in China will decrease by 2.5% this year, a decline that exceeds the earlier estimate of 2.0%. For next year, prices are expected to rise by 1.2%, which is also lower than the 1.6% predicted last November. It is anticipated that by 2027, prices will increase further by 2.0%.
How does the decline in rent affect housing prices?
Li Hengqing (李恆青) noted that the 'improvement housing' market in China, driven by the demand for home exchanges, still exists. However, overall housing sales are continuing to slow. In this context, insufficient demand is leading to falling rents, which will likely diminish the willingness of current homeowners to invest further, intensifying the downward trend in housing prices and making it difficult to reverse in the coming years.
Xu Zhen (許楨), vice chairman of the Institute of Future Cities at the Chinese University of Hong Kong, argues that from a land economics perspective, the relationship between housing prices and rents is not particularly strong. Historically, a drop in housing prices does not necessarily impact rental prices; conversely, a decline in rent could affect the valuation of properties when they are resold, thus hindering housing prices.
Xu Zhen further analyzed that the decrease in rent in medium to large cities reflects the weak wages of the working class. However, it is also important to consider that in Chinese society, whether in urban or rural areas, the proportion of residents owning their own homes is higher than in other countries. Therefore, the impact of housing rentals on the overall economy is not very significant.
In contrast, a more pressing issue in China is the market's inability to absorb the large number of vacant homes, which has a more severe impact on both housing prices and rents.
Will China's stimulus policies be effective? Analysts are generally pessimistic.
On the other hand, although the Chinese Communist Party (CCP) government has implemented various stimulus policies since last year, some analyses suggest that new stimulus measures may be introduced during the upcoming National Two Sessions. However, analysts interviewed by Voice of America generally believe that the outcomes are unlikely to be positive.
Taipei scholar Xiao Duyuan argues that the public's increasingly pessimistic attitude means that the government's ongoing relaxation of capital controls will only strengthen their belief that the economy is indeed struggling, which necessitates government subsidies. Consequently, this leads to a cautious approach to saving rather than active investment.
Given this context, the Chinese economy is expected to face challenges for a significant period ahead.
Xu Zhen highlights that the main issue with the CCP's official market rescue policy is its 'misguided direction.' With changes in the demographic structure, the decline in China's labor force has become an irreversible trend. In this scenario, the focus should shift from pursuing overall economic growth to enhancing the median 'disposable income' of the populace.
He notes that the current median disposable income in China accounts for approximately 30% to 40% of the total economy, which is significantly lower than that of sustainable domestic demand-driven economies like the United States, the United Kingdom, or Hong Kong, where this figure typically ranges from 60% to 70%.
In a situation where ordinary citizens 'have no money in their pockets,' a relentless pursuit of total economic growth is evidently ineffective in stimulating consumption, genuinely driving domestic demand, and cannot achieve the economic 'dual circulation' that the CCP government aspires to.
Xu Zhen stated to Voice of America, 'I believe that the current situation of economic weakness will continue; it has created a vicious cycle. Foreign direct investment is pessimistic about the development model of mainland China. To be frank, the Chinese economy is already experiencing significant losses and is unable to sustain its operations. Under these circumstances, wages are declining, and there is even a risk of deflation at this moment.'
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