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在线翻译:
szdaily -> Business -> 
Developers boost housing rentals
    2018-04-17  08:53    Shenzhen Daily

MAJOR real estate companies are renting more of the apartments they develop as they respond to a government call that China should produce “homes to live, in not to speculate on.”

But it comes at a cost as the developers will make little, if any, initial return from renting.

The net yields on rental properties for the biggest developers are only 5-6 percent, and for smaller firms with higher costs they may even be negative, according to the developers and real estate analysts.

By contrast, the profit margins on properties that are sold have usually been clear for all to see — averaging in the 20-30 percent range in recent years.

Many cities started imposing restrictions on land sales last year, forcing developers to build some homes to rent rather than sell, making the properties much less lucrative. Not only are the companies looking at lower returns on the developments but they also have the balance sheet risks of continuing to own them.

This is all, in turn, set to speed up market consolidation and joint bidding as companies share the costs.

Vanke, the country’s No. 2 developer by sales and one of the early comers to the rental market, plans to double the number of apartments it is renting out to 200,000 in 2018.

Rental apartments “are not supposed to make a lot of money in the first place,” China Vanke chairman Yu Liang said at an earnings conference late last month, adding that there has to be a balance between rental and sale markets.

He said that the rental market could be profitable in the longer term if the authorities put sufficient supportive policies in place. Local governments have recently been offering preferential lending rates and new fundraising channels such as corporate bonds and securitization to help the rental business.

Clearly, though, the demand is there. L+Research Institute, the research unit of real estate agent Lianjia, estimated the number of tenants will reach 230 million in 2025, up from 160 million in 2015. It sees the total rental value of the Chinese market rising to 2.9 trillion yuan (US$460 billion) in 2025 from 1 trillion yuan in 2015.

Lianjia also said the number of rental apartments in China grew 40 percent in 2017, compared to growth of less than 15 percent in 2015.

China’s largest developer by sales, Country Garden Holdings, which set up a rental business unit late last year and laid out an aggressive plan to own 1 million rental apartments in three years, told reporters that the business is “tough” for companies just getting started in the rental sector.

Profitability from rental property is lower than from sales, the company’s chief financial officer Wu Bijun said in February. “But under government support, it will become a common business for the industry.”

Not only does it take longer to collect cash from rental housing, targeting young professionals with limited incomes means landlords can’t always charge the higher rents they would like, the developers and analysts say.

Developers, such as Vanke, are mostly leasing or buying under-utilized assets such as hotels, offices and warehouses and redeveloping them into rental units as that way the returns are much higher than they would get if they bought land and built new developments.(SD-Agencies)

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