1. China’s top-tier city announces flurry of policy incentives to boost home rental market

China’s top-tier city announces flurry of policy incentives to boost home rental market

One of China's top-tier cities, Guangzhou, has announced a flurry of policy incentives including equal education access, tax cuts, and monetary support to boost its rental market amid fading housing affordability in a year-long property boom.

By: | Beijing | Published: July 19, 2017 12:00 PM
china, china home rentals, china property, Guangzhou city china, Guangzhou home rentals, Guangzhou home rental market The city also slashed and even eliminated value-added taxes in some cases for registered companies and individuals operating or involved in the residential rental business. (Reuters)

One of China’s top-tier cities, Guangzhou, has announced a flurry of policy incentives including equal education access, tax cuts, and monetary support to boost its rental market amid fading housing affordability in a year-long property boom. The move comes as China spear-heads a government-backed drive to support rental supply to help rein in property prices and satisfy housing demand.

While property prices have shot up, driven by speculation and demand from a growing middle class, China’s rental market has long been underdeveloped and largely remained unregulated, with rental yields easing to multi-year lows.

Guangzhou will ensure children of tenants, many of whom are migrants working in the mega-city of 14 million, enjoy the right to attend a school near the rented property, provided that the tenants fulfil the same qualifications in a point-based ranking system adopted by the city.

Home ownership is a key requirement in China’s school allocation system, as policies dictate school enrolment to be largely determined by the location of the student’s home. It has led to sky-high property prices in better school districts.

The city also slashed and even eliminated value-added taxes in some cases for registered companies and individuals operating or involved in the residential rental business. The details were released by the city government late on Monday.

For example, landlords leasing out personal holdings would be exempted from tax obligations in 2017 if their monthly rental income is below 30,000 yuan ($4,440).

Guangzhou has also raised the amount of money that tenants are entitled to withdraw monthly for the purpose of paying rent from their contributions in the Housing Provident Fund (HPF) by 10 percentage points.

The HPF is a mandatory social insurance fund that requires employees and their employers to make monthly contributions to address the issue of affordable housing.

Guangzhou’s new home prices in June rose 17.8 percent from a year earlier, official data from the Statistics Bureau showed. The rental yield in all the first-tier cities – Beijing, Shanghai, Guangzhou and Shenzhen – has fallen below 2 percent, according to Shanghai-based E-house China R&D Institute. ($1 = 6.7565 Chinese yuan)

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