Shanghai has previously announced that it will increase its land supply for new residential developments according to its five-year-plan released last year. It is the 13th land use plan, and it encompasses 2016 up to 2020. The plan will help ensure stability and healthy housing growth in the market.
Based on the plan, there should be approximately 1.7 million units as new additions to the housing market. If this target is reached, it will lead to a 60% increase from the city’s 12th five-year plan.
The outline of the plan includes about 450,000 units of commodity houses or those residential properties that are not involved in the affordable housing program of Shanghai. There will be an addition of 550,000 affordable homes. As for the remaining 700,000, it will be allocated for leasing, which means that the city has its eyes set on rental home developments in the coming years.
More Land for Rental Developments
Over the past six months, Shanghai has auctioned almost 30 sites in the region, which will be used for housing developments, particularly rental projects. It was the first time that a mainland city auctioned land parcels for rental homes only. Rental properties are those that developers can create for the sole purpose of leasing and not to sell them.
A total of 29 sites were sold during the auction that took place in July of last year. The land sites can be used to create about 40,000 units in the combined areas, which will cover 2.4 million square meters. In 2016, the city only dedicated 1.8 million square meters for rental developments.
According to the Shanghai Planning, Land and Resources Administration, most of the land supply that is equivalent to 170 square kilometers will be specifically for rental homes.
The mentioned land supply was recently allocated for residential properties and will be available from 2018 to 2030. Different channels will be utilized to multiply the space for rental homes. The construction of smaller flats is supported by the administration as it would help meet the demand for housing in the city.
Why Allocate More Land for Rentals?
Although there is no exact measurement of land for rental home use in the coming years, the city has a total of 660 square kilometers earmarked for residential developments. It is expected that this number will grow to 830 square kilometers by 2035.
Shanghai, which is not only the biggest city in China but also its commercial capital, has a problem when it comes to the inadequate supply of land. As a result, people who have wanted to purchase homes have been in a rush to buy flats in the city since 2015.
Unfortunately, home prices have increased over 100% around mid-2015 to the beginning of 2016. In just less than a year, the jump caused a few issues for the housing market of the city and more importantly, its citizens.
How the Additional Land for Rental Developments Can Help Shanghai
The government decided to step in, which gave it the power to limit the soaring home prices in 2016. The authorities also limited home purchases, while implementing stricter mortgage standards to control the situation.
According to the government, the skyrocketing prices are a barrier that should be taken seriously as they hinder the transformation of the city into a shipping and financial center. For experts like Martin J Stallone, Land Development’s VP and Metropolitan Development Group’s managing director, it is crucial to curbing the property prices.
With Shanghai attracting several professionals from different parts of the world, not only from China, it should not be difficult for these people to buy a home in the city. Since it is not the case, Marty Stallone suggests that there should be enough housing units with affordable prices – and it is precisely what the authorities in Shanghai are aiming to accomplish.
With the 13th five-year plan in place, which aims to provide 700,000 rentals by 2020, leasing the units should not be a problem for individuals. These units are targeted toward low-income households as well as young entrepreneurs who would like to begin a technology startup in the city. The accommodation costs should no longer be an issue once the developments start rolling.
Martin J Stallone agrees with this move as it is a laudable attempt to have more rental options while establishing a fair housing system for both tenants and owners.
Solving the Crisis
The problem with rising home prices is all over China. Shanghai is one of the 13 major cities in the country that will have a significant program to build more rental housing units, particularly on rural land. Other cities include Beijing and Guangzhou, which, together with Shanghai, will have critical projects that can be finished by the end of 2021.
It has been years since the property prices in Shanghai have put the citizens, especially the homebuyers, under pressure. Housing affordability for the rental market, Marty Stallone believes, is a way to stabilize the costs and restrain the frenzy.
