Tenants are now playing like Russian nesting dolls, with three-bedroom clients downgrading to two-bedrooms, and two-bedroom clients turning to co-ops.
Hello, I’m Sun Shaosleep and this is my 270th real estate article.
Renting an apartment affects two roles. People who work outside the home need to rent, and homeowners with unused properties need to rent. This should be a virtuous cycle market, but from what I’ve seen around me, the difference in market conditions in Shanghai’s rental market is very obvious.
In the Shanghai rental market, second rooms are more sought after than one-bedroom apartments
Let’s look at a few sets of data first.
In January 2025, the average price of a two-bedroom apartment in Shanghai’s Inner Ring Road was about 9,000 yuan per month, or 4,500 yuan per person if the rent was split between two people. And what about one-bedroom apartments in the inner ring? The average price is as high as 5700, also more expensive 1300.
I just graduated in Shanghai when renting a room, I moved to rent a whole three-room apartment and then look for the idea of roommates, but the start-up capital is not enough to stop.
Then look at the same area of the three rooms, the rental price of about 17,000 more, a person to carry about 5600, but instead and the one-room household similar.
From this set of data, do you taste anything? In that case, why not go for the ultimate in value for money? A smell of consumer downgrading permeates the property market.
The two-bedroom is simply the favorite of tenants today because of its cost-effectiveness that crushes the market. And because of the high unit price per person assessment is expensive, tenants are discouraged, the rent and heat fell that miserable.
Rental differentiation between two-room and three-room seems especially obvious. What is reflected behind this is that under the pressure of the economic downturn, tenants have to be careful with their budgets. It’s also the result of the price insensitivity of many wealthy people.
There is a subtle correlation between the increase in the rent-to-sale ratio and the policy of guaranteed rental housing. in 2024, Shanghai will add 72,000 guaranteed rental housing units, with the core area accounting for over 30% of the total.
This type of housing is generally 15 20 below market price. When the supply of low-priced rental housing continues to increase, a dual-track system of rental prices may be formed, forcing market-based rental housing to adjust its pricing strategy, which may be the hidden driver of a passive increase in the rent-to-sale ratio.
Geographic location has a greater impact on rents than imagined
In addition to the type of apartment, rail transportation is also a key factor in rents In the inner ring where prices are over 100,000 yuan and the suburban ring where prices are less than 20,000 yuan, the rent premium within 1km of the metro reaches 25 and 37 respectively, while it stabilizes at around 9 around the Central Ring Road.
In the inner ring, rents for properties with metro are 12 times higher than those without metro. Outside the suburban ring, the gap is even more exaggerated, approaching 1.4 times.
An extreme sample is found in the suburban ring: a two-bedroom apartment in Sijing Metro is listed at RMB 6,200, while a property of the same quality 1.5km away drops to RMB 3,800. A three-bedroom apartment in Cao Lu Station has a premium of 33, which is equivalent to the RMB 8,6 yuan that tenants pay per day for a one-way commute.
This reveals a hidden hourly wage conversion of commuting costs A white-collar worker with a monthly salary of 20,000 yuan, commuting for 2 hours a day equals an automatic hourly wage deduction of 57 yuan.
Save money OR save time, this is the torturous trade-off that tenants outside the suburban ring have to face. Now that many companies are starting to catch attendance and overtime hours, living far away makes the commute a bottomless pit.
But the rent is there, can live in the inner ring, who wants to live in the good mountains and good water every day 4 hours back and forth in the lonely suburban ring?
In the end, it’s still because they can’t afford to part with a single penny. Just like the news that Huawei is moving to Qingpu, they immediately raised the rent. Ordinary workers can only be in the landlord’s price floor is forced to spill over. The subway, then, became the last straw connecting dream and reality.
From the data of the Municipal Bureau of Statistics, in 2023, the average salary of the financial IT industry increased by 9 2 11 4 respectively, while the traditional manufacturing industry only increased by 4 3 .
The ability of high-income groups to pay for quality rental housing is hedged against the price sensitivity of ordinary white-collar workers, which explains why small households are firming up while large ones are under pressure.
In the future, as emerging industries such as AI biomedicine gather, specific areas such as Zhangjiang Lingang are also likely to see structural rent increases.
The overall trend in the rental market is changing
After talking about differentiation, let’s take a look at the overall trend. Shanghai’s rent-to-sale ratio, that’s really riding high.
January data show that the city’s rent-sale ratio has reached 1 73 , a record of nearly 8 years. In some areas, the rent-to-sale ratio of a house even exceeded 2.
The economics of holding costs are starting to take hold. Every 0.1 increase in the rent-to-sale ratio is equivalent to a 12,000 yuan reduction in the landlord’s annual holding costs. This is also why the owners of the inner ring would rather be vacant for 3 months than reduce the price They smelled the breath of the second-hand market bottoming out.
The higher the rent-to-sale ratio, the lower the landlord’s cost of holding the house, the stronger the bargaining bottom of the second-hand market. The base price of second-hand houses in the inner ring has already started to rise slightly.
Shanghai is now the rent-sale ratio, rent stabilized house prices stabilized trend has initially appeared. In the future, whether the rent can go up or not, whether the price will fall or not, the rent-sale ratio will be an important wind vane.
Shanghai’s population will continue to inflow in 2025
In addition to the economic environment, there is a key factor that determines the fate of the rental market in Shanghai People.
In 2022, Shanghai’s GDP exceeded 5 trillion, the first city in the country to reach this height. The strong economy provides a confidence booster for the property market. More importantly, the city’s siphon effect on talent continues unabated.
In the first half of 2023, Shanghai led the country in year-on-year salary increases. At the same time, college graduates Excellent talent accelerated to Shanghai concentration. The new population is the hope that rents and house prices will last forever.
Although it is difficult to say that rent and house prices are optimistic in the short term. Small households may be able to stabilize, but the decline in the rent of large households is reflecting the current economic environment and the reality of the plight of personal income.
Standing in a longer time dimension, I am still optimistic about Shanghai. Bullish on the city’s innovative vitality, bullish on a steady stream of demographic dividends, but also bullish on more and more like me, the young people working here.
In conclusion
If we compare the rental market to the capillaries of the city’s economy, the current round of fluctuations is like an accurate blood test.
Those young people who are obsessed with the idea that renting is not as good as buying might want to change their algorithm. According to the current rent-to-own ratio, renting a two-bedroom apartment in the inner ring costs about 2% of the total price of a property in the same area per year, and that’s not even taking into account the interest rate on the mortgage and the wear and tear on the property.
When the cost-effective balance between the right to live and the right to property is quietly tilted, smart tenants began to use the savings of the monthly payment to invest in funds Data show that the balance of the financial accounts of post-90s tenants increased by 27% year-on-year, which is not another form of getting in the car?
END
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I am Sun Shaosleep, please stay tuned.
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