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A holistic approach may be the only way to treat China’s real estate price woes

To make renting more attractive for residents, the Chinese government needs to take a more systematic approach by providing an equally distributed network of public services

By NewsChina Updated Sept.1

On July 17, the municipal government of the southern Chinese city of Guangzhou announced plans to allow rental tenants the same access to local education facilities as homeowners. The policy has gained wide attention because it suggests that the Chinese government is changing its real estate policies to assist the home rental market.  

For some time, access to education has been one of major reasons why people prefer to own their homes in China. Most cities have policies which state that homeowners have priority over renters when it comes to accessing local schools for their children. With limited access to local public resources and rising house prices, home rental has long been considered an undesirable choice, which has in turn fanned soaring house prices.  

On July 20, the central government released a policy guideline that asked large- and mid-sized cities to boost their rental markets, and designated 12 cities to implement a pilot program aimed at doing so. The details of the pilot program remain unclear. But some of China’s largest cities, including Beijing, Shanghai and Shenzhen – which have all seen house prices skyrocket – have also taken steps to encourage residents to rent their homes rather than trying to buy them outright.  

On July 24, the Shanghai government, for example, approved two “rent-only” real estate projects. But for China to effectively develop a mature rental market, it will require a more systematic approach than just a few isolated policies.  

Despite the enthusiasm about Guangzhou’s policy regarding tenants’ rights, its impact will be limited, as a minority of tenants will benefit. While granting tenants “equal rights,” it does not grant non-resident tenants, nor non-resident homeowners resident status, which is often a pre-requisite for access to local public services, including education and healthcare. Even among resident tenants, given increasing competition over school places in big cities, renters may still not have the opportunity to enroll. Even if they can, the policy’s benefits may be annulled by rising rents resulting from increased demand.  

To make renting more attractive for residents, the Chinese government needs to take a more systematic approach by providing an equally distributed network of public services. A major reason that China’s biggest cities have witnessed greater and quicker price rises is that their public services are of a higher quality than those of smaller cities. It’s also not a surprise that house prices are much higher in catchment areas.  

Providing adequate public services should be a primary concern in the government’s real estate policy. For example, developing affordable properties for lower-income groups has long been considered an effective way to combat property speculation, and the government built more than 36 million affordable homes in the five years to 2015. But despite their relatively low prices, many affordable homes reportedly remain vacant because they are located in areas far from city centers, and have minimal access to public services.  

As the central government begins to nurture a healthy rental market in order to combat property speculation, Guangzhou’s new policy is definitely a step in the right direction. But there is still much more the government can do in this regard.