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Property tax rule pushing up cost of renting
February-12-2011

The government's latest property rules are providing extra impetus for rent increases in many Chinese cities, according to a survey conducted by China Youth Daily.

In the survey, 81.6 percent of the 4,060 respondents interviewed said they "are suffering from the increase in rents". Among them, 34.8 percent said their quality of life has been "greatly affected by the increase".

The respondents came from 31 different cities across the country, and nearly 70 percent of them were born in the 1980s.

Not surprisingly, those renting a home in big cities like Shanghai and Beijing were being hit the hardest.

On Jan. 28, the Shanghai municipal government introduced the first ever property tax on buyers of second homes. The tax was the latest in a series of measures adopted by the central government in the hopes of reining in soaring property prices. The changes have also included restrictions on the number of homes that can be bought and an increase in the minimum down payments required for purchases of second homes.

And the efforts are not confined to Shanghai. Chongqing municipality has also introduced a property tax.

"House rent has increased by 20 percent since mid-2010, and has climbed to a historic high level," said Li Yongzhe, a real estate agent of Gucheng Agency in Shanghai.

"The government's tightening policy has scared away many potential buyers," said Li. "Instead of rushing to buy homes, many have chosen to rent."

That trend, he and other property agents said, has greatly driven up the demand for rental properties in Shanghai.

Shu Wei, a 24-year-old computer engineer from central China's Hunan Province who is now working in Shanghai, is thinking about moving to a remoter place in the city because he can't afford the rising cost of rent, even though he is sharing a two-bedroom apartment with two other people.

"I wouldn't even think of buying a house in Shanghai now," Shu said. "But housing issues have still become a burden for me."

Xue Jianxiong, an analyst with the China Real Estate Information Corporation, said landlords in recent years have charged rents that have been too low to cover the cost of investing in rental properties. Landlords are now trying to make up for those losses, as well as trying to ensure that their incomes keep pace with the rising cost of living.

"In the past several years, property prices have not been the only thing that has jumped; commodity prices have undergone a huge increase as well," he said. "Besides, the introduction of the property tax is also adding to the cost of property investment, and landlords are very likely to transfer all of the new costs to tenants."

He Yongfang, a landlord in Shanghai, agreed with Xue's opinion. She said that, while recently signing a contract with a tenant, she raised the rent she charges by 10 percent.

"The price of everything is inflating," said the 53-year-old housewife. "So it's reasonable that I increase my income a little bit."