Shanghai strives to develop rental market

Two parcels of land in Shanghai are being leased for "rental residential projects", the first of its kind in the city, as the metropolis encourages the development of a variety of residential properties.

Shanghai's land and planning authorities said on Tuesday evening that two parcels, 65,000 square meters in Pudong district's Zhangjiang science park area and 28,500 square meters in Jiading district, would be leased for 70 years, and those who acquire the land parcels at later auctions must ensure that the projects developed must be rented residential properties.

Lu Wenxi, a Shanghai-based Centaline Property analyst, said that "rental residential property" is a brand-new purpose for land use emerging amid a fast changing residential property market.

"Since the beginning of 2017, Shanghai has been making a series of moves to encourage the development of the rental market to improve efficient and reasonable use of land. Leasing land parcels for rental purposes only is a direct move to support rental market growth and a gesture to guide the market to consider other options of residential development," said Lu.

According to Shanghai's land planning authorities, priority is given to bidders aiming to develop projects for rental projects for highly skilled staff moving from other locations to Shanghai, such as leading scientists and experts. Rental costs shall not be higher than the average level of similar properties, and can be adjusted in accordance with market price fluctuations.

Several provinces across China have launched policies encouraging the development of rental properties, including allowing developers to transform land use from commercial to rental residential since the beginning of 2017, including Guangdong, Guizhou and Jiangxi.

So far, 10 of the top 30 developers in China have tapped into the rental market across China, according to data from Shanghai-based CRIC, a real estate information services provider.

"Entering the rental market requires strong cash flow management capacities as projects work on long-term stable and steady income, and big players are already allocating more resources in this niche market. China will see more rental projects in the near future," said a CRIC research note.