When stability becomes a liability

Owning a home has always been a priority in life for many Chinese, but with home prices on the constant rise in recent years, many people are turning to the rental market to get a roof over their heads

About a decade ago, a television series called woju, which refers to homes that are as small as a snail's shell, became a huge hit among Chinese audiences because it depicted the struggles families had to go through to buy a home in major Chinese cities.

Many young Chinese viewers commented that the scenarios portrayed in the show were very reflective of the situation back then - people would scrimp and save for years only to realize that they still couldn't afford to foot the down payment of a home.

In Chinese culture, owning a home has long connoted stability. Despite the fact that buying a home in a first-tier city like Beijing and Shanghai usually means depleting the savings of the child and the parent and having to pay huge mortgage loans for decades, many people still go ahead with making the commitment.

In 2015, the average monthly salary in Shanghai was 5,939 yuan ($863). A dual-income family would have needed to save every single penny for about 20 years in order to buy a 90-sq m apartment.

As of December 2016, the current average price of new homes in Shanghai was 40,794 yuan per square meter, compared to 39,307 yuan per sq m in Beijing and 57,998 yuan per sq m in Shenzhen, Guangdong province, according to E-House (China) Holdings Ltd.

Embracing the alternative

According to Chen Lina, an analyst from Shanghai Sinyi Realty Agency and Consulting Co, people who choose to lease homes though they are capable of buying one are either international residents or those who have yet find an affordable or ideal property.

Zhong Zixuan is one individual who can afford a home but has chosen to rent instead. Zhong and her husband first shared an apartment with another tenant in Pudong New Area's Zhangjiang region before relocating multiple times to different parts of the city. The couple and five other family members currently reside in a 175 sq m three-bedroom apartment located in Jing'an district that they are renting for 20,000 yuan per month.

Zhong has been questioned by many of her friends and relatives about her reluctance to buy a home even though she can afford to.

Her answer? She wants to earn even more money so that she can afford the ideal home in a central location like Jing'an.

These days, however, an increasing number of individuals are choosing to rent even though they can afford their dream home. To Shu Yi, a marketing director at a local company, renting a home gives her a sense of freedom. She said that not being tied down by mortgage payments gives her the opportunity to pursue her interests such as learning French, swimming, going to the gym and traveling around the world.

Shu has since 2005 been living in her leased apartment located in Jiangsu Road in Changning district. As she earns 360,000 yuan per annum, Shu is able to comfortably afford buying her current apartment which is valued at about 4 million yuan. Her friends and family have been encouraging her to buy the unit too.

"I don't want to be one of these people, and I am glad I'm renting instead of buying. I am an independent person and freedom is the most important thing in the world to me. I do not want to let a mortgage sabotage my quality of life," said Shu.

"I will continue to rent a house for at least another five years. I don't know what will happen five years later, but I am pretty sure that I will make the decision rationally and always prioritize quality of life."

A logical choice to make

Industry experts said the number of people who think like Shu and Zhong are growing in numbers, seeing how rental rates have grown at a slower pace than new home prices.

According to data by real estate services provider Savills, the average price of new homes in Shanghai surged from 10,336 yuan per sq m in 2007 to 32,151 yuan per sq m in 2015. In contrast, rent for medium- to high-end properties rose from 173.2 yuan per sq m to 181.3 yuan per sq m during the same period. James Macdonald, head of Savills China Research, said that the annual rent of a two-bedroom apartment in Shanghai is only between 1.5 and 2 percent of the property's value.

Macdonald also added that young professionals working in major cities like Shanghai usually prefer to rent a home in the more central areas of the city so as to reduce their traveling time to work. Having to buy a home would usually mean having to settle for a property far from the city center where prices are lower.

Zhang Xue, who started renting homes ever since she graduated from Shanghai International Studies University a few years ago, is one such individual who would rather rent a home close to the workplace and cut down her traveling time.

"My current salary allows me to buy a small apartment in suburban Jiading district, which costs about 1 million yuan. But the sacrifice is too huge - I will have to spend at least three hours a day commuting," said Zhang.

"Besides, buying the ideal home is an unreachable goal. When I earned 5,000 yuan a month, the home price was too high. Now, even though I'm earning 20,000 yuan a month, the home price is still equally prohibitive."

For Sun Yongshi, a senior student of Communication University of China in Beijing, the decision to rent instead of buy is down to environmental conditions.

"Considering Beijing's air condition, I prefer to buy a home in Zhejiang province or my hometown in Jiangsu province as an investment. But my preferred work location is Beijing," said Sun, a part-time trainee at Bank of Tangshan who is currently renting an apartment in the Chinese capital.

Cheng Sun, a Shanghai native who is now living in a 130 sq m apartment that he leases for 15,000 yuan a month, said that rented homes afford a flexibility for people like him who travel a lot for work.

"I will likely to be traveling between many Chinese cities and even countries in the future, so living in a rented home makes more sense. As long as the lease is long enough, I do not see any difference between a leased home and one that I own," said Cheng.

Rental demand set to grow

A recent survey conducted by Chinese online classifieds 58.com showed that a significant population of young people in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen live in leased homes. According to Beijing News, 41.69 percent of the married couples polled rent a home, while 60.26 percent of those currently renting a home said they will continue to do so in the next three to five years.

Looking ahead, Macdonald said that the rising mobility of white collars in large Chinese cities will result in more people living in leased homes, similar to the situation in other global cities around the world.

Chen Sheng, president of the China Real Estate Data Academy, added that the government should consider implementing policies that provide tenants and home owners with equal benefits in terms of education and social welfare.

He Wei and Pan Yixuan in Shanghai contributed to the story.

wang_ying@chinadaily.com.cn

(China Daily USA 02/24/2017 page9)