From hibernation to prosperity, the long-term rental apartment market ushered in the dawn
Rental is a long-term demand, but the first demand in the real estate market has always been to buy houses, and rental is only a scattered operation. The reason for the sudden influx of capital into the long-term rental market, which has become a hot potato, is related to the change in demand and multiple boosts.
By the end of last year, there were 245 million migrants in China, according to the China Floating Population Development Report 2016. The floating population in Beijing, Shanghai, Guangzhou and Shenzhen, where high-quality resources are concentrated, is particularly large. In contrast, the housing price is extremely high, and not everyone can enjoy it. Therefore, most of the floating population have rental demand.
According to the 2017 Leasing Blue Book, demand for rental housing increased 57 percent in 2017 compared with last year. The post-90s have also changed their view of home ownership, with 72% of them choosing to rent.
Although residents in various cities are still enthusiastic about buying houses, the real estate market has actually entered the stock period, and a large number of idle houses are available for rental market development. At the same time, the profit of traditional property development business has also declined due to the intensified regulation of the property market and fierce competition in the real estate market, and new growth points need to be explored. Data show that the size of China’s rental market in 2016 was about 1.1 trillion yuan, and the size of the housing rental market naturally makes enterprises excited.
More importantly, in order to promote the development of the housing rental market, Beijing, Shenzhen and other cities have issued a series of rental policies, for the rental market to set fire to the prairie fire. Such as the Beijing issued “about speed up the development of the city housing rental market and standardize the management of the notice, the on-line housing rental regulatory platform, and at the same time issued” on further strengthening the construction of collective land rental housing to work opinion “, in the next five years will provide 1000 hectares of collective land, for the construction of collective housing construction. For example, several major cities in Beijing, Shanghai, Guangzhou and Shenzhen have launched “rent-only, not for-sale” residential land.
The market demand is strong, coupled with policy encouragement, the long-term rental market has become a new favorite of capital for a time, and there are many long-term rental apartment brands such as Freely and Rubik’s Cube.
Quality wins, young tenants prefer long – term apartments
Compared with traditional rental apartments, long-term rental apartments have many advantages such as superior quality and value-added services, which are widely welcomed by young tenants.
First, free and equal length rental apartments will be renovated after the landlord rents over and then rented in the form of a single room. The supporting facilities of individual long-term rental apartments are also very complete, including not only the apartment manager, but also the public area, with a billiard table, gym, game room and other complete facilities. The manager will also hold various activities from time to time, trying to provide a venue for the tenants to communicate with each other in their spare time. Without going out of the apartment, renters can participate in social activities. Renters can make friends with like-minded people in the long-term rental apartment, which is also helpful to expand their connections. With these characteristics, the long-term rental apartment attracts many white-collar people and create guest groups.
Second, people who have experienced renting must be deeply affected by the feeling that renting through the intermediary may encounter a lot of pits, impossible to guard against, renting a room with the intermediary have to battle wits and courage, this situation is more serious in Beijing and other first-tier cities. Renting apartments for a long time is equivalent to the role of the principal landlord, which saves the time for the tenants to deal with the intermediary and makes renting more efficient. Meanwhile, most long-rented apartments are managed through APP. Users can not only rent apartments through APP, but also pay water, electricity, property and other fees with one click through APP, which provides a convenient lifestyle.
A number of advantages added to the body, a number of long-term rental apartments are almost as soon as the launch of tenants rush to grab. According to the Beijing Morning Post, the occupancy rate of the long-lease apartment has reached about 90 percent in just two months after it opened, so it is no wonder that capital has flocked to the long-lease apartment project. It is reported that many long-term rental apartment brands have received multiple rounds of financing, including Rubik’s Cube Apartment, which received a $300 million SERIES C financing in 2016, and Lei Jun, founder of Xiaomi Technology, which invested 100 million yuan in You + International Youth Apartment in 2014.
Among them, The long-term rental apartment brand, Freely, relies on the store resources of Lianjia to acquire housing resources at a lower cost than other long-term rental apartment brands. It can also cultivate long-tail customers through the rental market and deliver part of customers to Lianjia to achieve mutual prosperity in the housing rental and purchase market. It is known that Freely has about 200,000 owners at present.
Profit problem in front of long – term rental apartment quality high-rise collapse
The domestic real estate market has always been based on the purchase of housing, rental market in a fragmented state of operation for a long time, has not been fully developed. Driven by capital and policy, the long – term rental market is booming. However, judging from the recent incident in which The Long term rental apartment was involved in the cleaning of communal housing and the negative public opinion of formaldehyde housing, the long term rental apartment may already be crawling with lice.
Long-term rental apartments have low rental rate of return and long profit cycle. The return period of well-managed long-term rental apartments also takes three to four years. Many long-term rental apartments are still in the investment period, and Vanke’s long-term rental apartment brand has not realized overall profit so far. In the case of entrepreneurs crowding together, the competition in the long-term rental market is becoming increasingly fierce. For many enterprises, a long profit cycle is not good news. The difficulty of profit is like the first domino, which constantly pushes other “tall buildings” that have been built with great difficulty.
First of all, the housing resources of long-term rented apartments are mostly obtained from the rental owners’ houses. Renovation and housing rental are two huge costs of long-term rented apartments. Data show that rental costs account for 70 percent of long-term rental apartment rents, long-term rental apartment profit thin. To make a profit, many long-term rental apartments actually only offer short-term rentals of up to a year, in order to facilitate rent increases the following year to earn more of the rent difference.
Now rent the apartment more concentrated in the first-tier cities, for the floating population is numerous, rental demand is high, even if the housing is not good quality is also very hot, the scene, in order to save costs, improve the utilization rate of the rent many rent the apartment to maximum developed renting, freely is because of development of partition between clear into the accommodation. Although the platform claims that the partition rooms meet the partition standards of rental houses, it can be speculated that there are partition rooms that do not meet the standards in places where supervision is not possible, not only violations, but also safety risks.
Second, the rental price of long-term rental apartments is 15% to 20% higher than the market price, which is billed as quality, but in fact, the services of long-term rental apartments are increasingly distant, which does not seem to match the promotion of “quality apartments”. For example, Many cases of serious quality problems involving excessive formaldehyde content in single rooms of Freely Apartment were revealed, which is also due to the fact that enterprises are unwilling to leave rental houses vacant for a long time and want to improve the rental rate while ignoring the housing rental standards. As a matter of fact, since most of the long-term rental apartments are targeted at young white-collar workers, the two advantages of social contact and regular activities in public space cannot be brought into play. Due to the busy work of tenants, the utilization rate of public space is very low, and activities are difficult to be carried out.
Finally, although the “right to rent and purchase” gives many people a new choice under high housing prices, rental houses lack the function of asset preservation, and many tenants still have plans to buy houses in the future. As a long-term market, the market education is not mature enough and the supporting policies are not perfect enough.
Long-term rental apartments cannot balance rent, quality and service. In addition, nowadays, with the intensified competition and the rising cost of acquiring customers, long-term rental apartments encounter difficulties on the basis of difficult profitability, and the quality and service also decline.
Balancing quality and profitability is the long-term solution of renting apartments
A long-term rental apartment is not so much a rental house as a sale of lifestyle. When lifestyle is regarded as a commodity, the only criterion to measure its quality is service. Long-term rental apartments need to rely on long-term operation to achieve profits, rather than chasing short-term benefits. Insiders also mentioned that tenants only complete 10% of the value delivery when they move in, and the remaining 90% need follow-up services and operation. The recent spate of negative headlines about free-for-all rental apartments can lead to a crisis of confidence in the immature market. To balance quality, profit and service, such as Free rental apartment brands might as well start from two aspects.
On the one hand, the advantage of long-term rental apartment lies in quality and value-added services, decoration and transformation is an important link to ensure quality, long-term rental apartment must improve the decoration acceptance standards, not only renovation must be carried out in accordance with rental housing safety standards, after the decoration also need to check the formaldehyde content, etc., not up to the standard will not rent. Through strict acceptance can reduce and eliminate the existence of violations and safety risks.
On the other hand, long-term rental apartments are also clustered in Beijing, Shanghai, Guangzhou and Shenzhen, and their positioning and operation are all caught in homogeneous competition. The rising cost of acquiring customers makes it more difficult for long-term rental apartments to make profits, but the long-term rental market in second and third-tier cities has not been developed. At the same time, most of the long-term rental apartments position the tenants as single white collars. In fact, there is also a large demand for renting by families. However, the long-term rental apartments in the market are mostly single rooms with a small combination of rooms and halls, so they cannot meet this part of demand. Long-term rental apartment brands might as well start from the second – and third-tier cities or family needs, adjust positioning, to seize the opportunity of market segmentation.
From the free fall into group rental cleaning incidents and formaldehyde incidents can also be seen that long-term rental apartments in the increasingly fierce competition, in order to quickly occupy the market, has fallen into the mistake of seeking quantity without quality. Although low-quality houses can be rented out in first-tier and second-tier cities with strong rental demand, it is not the long-term operation of long-term rental apartments. Users prefer to choose long-term rental apartments because they are safer and of higher quality than ordinary apartments. If a long-term rental apartment is not of good quality, it will become an expensive apartment without any advantages. Therefore, long-term rental apartments should take this as a reference to ensure the compliance and safety of renovation, improve operation and service capacity, and develop new markets on this basis.
Liu Kuang, meditation on the Internet, wechat official account: Liukuang110