China Vanke is adapting to the central government’s plan to boost the supply of rental housing, after the country’s second largest developer confirmed that it will develop an 83,550 square metre Beijing residential project it purchased last December as a multi-family rental complex, rather than offering a “rent-as-sale” option.
In a break from China’s traditional model of condo development, Vanke was one of four developers to agree to develop the plot in the city’s Haidian district as a 100 percent build-to-rent project, under new government guidelines designed to increase the supply of rental housing and help control home prices.
Vanke Wins Out Under New Land Auction Rules
The Shenzhen-based developer, along with China Poly Property, Shanghai’s Greenland Group and a consortium of Longfor Properties and Beijing Capital Development, offered the all rental option after all four offered the government-set ceiling price of RMB 5 billion for the site in northwestern Haidian district.
Authorities had set the price cap in an attempt to reduce upward pressure on home prices, with the city set to award the plot to the developer which offered to build the highest percentage of rental property as a secondary criteria after the value of the cash bid. When all four developers offered to build the entire project on rental basis, the bidding then moved to a third round, based on the building standard that the developers offered, with Vanke having emerged victorious on December 1st.
Vanke will also be setting up a leasing management company under its holding to facilitate the long-term management of tenants, including tenant services, community management and other rental operations.
Beijing Targets Housing Affordability
Rent in Beijing – last year ranking the world’s least affordable by the UK-based Global Business Cities Alliance – has been increasing alongside housing prices in recent years and the central authorities have been moving to stop the trend. Last June the State Council issued a circular regarding plans to regulate and improve the rental market in China, including encouraging financial institutions to provide support for companies developing multi-family residential properties for rent.
Last month Chinese state media cited data suggesting that land supply in the first quarter of 2017 in first-tier Chinese cities – includin Beijing – increased by over 50 percent from the same period a year ago. This news came along with statistics from the National Bureau of Statistics that showed that home purchase restriction directed by the central government had yet to cool demand for housing.