Free Rent Reduction Survey: Long Rental Apartment "Ride Hard Tiger"

Free landlord Li Li (a pseudonym) is particularly depressed. In July of last year, at the price of 12100 yuan / month, the house was commissioned to rent freely. Recently, "housekeeper", on the ground of "price inversion", asked her to reduce the commission price by 1900 yuan to 10200 yuan.

Li Li signed a 4 year contract with him freely. The price reduction is in the contract period. According to the contract, the entrusted price of the first year is 12100 yuan / month, after which it is increased by 3% every year on the basis of the "vacancy period" of about 30 days per year. That is to say, in the next three years, the monthly rental income that Li Li should have earned was 12463 yuan, 12837 yuan and 13222 yuan respectively.

Because he did not want to cut prices, Li Li had to face another option - forced default. According to the contract, Li Li will be liable to pay a breach of contract equivalent to 2 months' rent (24 thousand and 200 yuan). But freely said, because of housing renovation, Li Li needs to pay for decoration, furniture and other expenses, the cost is close to 50 thousand yuan. That is to say, if the other party forcibly terminated the contract, Li Li would have to pay more than 20 thousand yuan.

Li Li's dissatisfaction is that she is in a dilemma because of the threat of rent caused by the epidemic. At the same time, in case of default, there is no provision in the contract for reimbursement of decoration fees.

Due to the indifference of the rental market in Beijing and the decline in rents, recently, many owners have received a satisfactory price cut, ranging from several hundred yuan to more than 1000 yuan. The price of individual houses has fallen by nearly 30%. This has also led to large number of contractual disputes.

Freely speaking, to the twenty-first Century economic report, the housing price of Beijing's price reduction was "very small, less than 1%". However, according to the reporter, the actual data is far higher than this. Many owners have formed a group of rights protection units based on residential areas, with dozens of similar cases in various parts of Beijing. In addition to their convenience, the eggshell and the equal length rental agencies have recently suffered disputes over rent reduction.

At present, there are more than 1 million rooms with free management. It is the largest long rental apartment operator in China. However, in recent years, the trust crisis has been constantly encountering. After the "formaldehyde door" and the code lock event, the "rent reduction storm" is evolving into a new crisis. However, the object of the dispute has changed from tenant to homeowner.

As the leader of the leasing industry, the crisis that faces itself is also a microcosm of the whole industry. Over the past few years, the leasing industry under the draught has been brutal growth. Now, when scale growth is in trouble, a series of problems begin to emerge.

"Price upside down"

Li Li's house is located in Chaoyang District, Beijing. It is a 152 square meter three bedroom apartment. After the transformation of the living room, the housing became a 4 bedroom rental.

Because of the full authority, Li Li did not know what price to rent. But at present, even if the rental price is 12100 yuan / month, the housing price has no obvious price advantage. In the same type of residential area as a reference, at present, in the same type of housing in the same district, the price of the whole house rent is 12000 yuan -13000 yuan / month, while the price of other houses is about 11500 yuan / month.

Of course, the residential area of some better decorated similar housing, the entire rental price can reach 14000 yuan / month. But the number of such houses is very small, and Li Li's house does not belong to this list.

The phenomenon that the entrusting price is higher than the rental price is called "price inversion", which usually reflects the excessive price of the commission or the low rent. Many owners reported to the economic report of twenty-first Century that the reason for lowering the rent is the "price upside down".

Since Li Li commissioned the housing supply to be free, the rental market in Beijing has been flat for the past year, and the rent level has not been rising as she expected, but it has slipped.

Shell Research Institute data show that from August 2019, the rental level in Beijing continued to decline year-on-year. Huang Hui, senior analyst at Shell Research Institute, said that in 2020 2-4, due to the impact of the epidemic on leasing transactions, the rent level continued to decline. In May, the rental market trading peaked and prices rebounded. In June, the volume of trading fell again due to the repeated outbreak of the disease, but the price chain did not change much, but it was still significantly lower than the same period last year.

In response, a similar explanation has been given. "Since 2020, due to uncertainties in the economy and the epidemic situation, as well as the impact of urban planning changes, business circle migration, and strict community control and access, the housing rental market has undergone significant changes, especially in the case of individual housing with the trend of hanging up the price of the lease and the rental price."

Before the price adjustment, housing vacancy has become more common. A residential district owner of Shijingshan District Wukesong said to the twenty-first Century economic report that after the Spring Festival this year, one of his two bedroom houses was vacant for 3 months. After consultations with him, he reduced the monthly rent by 800 yuan before he rented the house at the end of 5 this year.

"The degree of activity in the rental market is closely related to the employment environment." Zhuge search house data research center pointed out that although the major enterprises are actively resuming work and resuming production, but affected by the epidemic, enterprises "reduce manpower and reduce costs" is normal, which also leads to the fact that the activity of the rental market is not high.

The pain of high price expansion

Hu Jinghui, chief economist of Jing Hui think tank, said that compared with the short-term impact of the epidemic, the high cost of taking the house and redecorating brought about the "heavy cost" is also the reason why we have to cut prices freely.

Since the self regulatory layer first proposed "rent and sell simultaneously" in 2014, the rental market has developed rapidly, and a large number of large leasing management institutions have also risen. From 2017 to 2018, in the high-speed expansion of the scale, competition in the industry became hot, and some agencies began to compete for housing.

"The craziest time is 7 and August of 2018." Hu Jinghui told the twenty-first Century economic report that free, eggshell and other agencies compete for housing prices at a higher market price, and their cost is also greatly improved.

Zhu Hongyu (a pseudonym) of a two bedroom is located in Chaoyang District, Beijing Nong Guang South Road District, in 2014, he had signed a 4 year agreement with free, the commission price was less than 5000 yuan / month. In 2018, Zhu Hongyu signed a new two year trust agreement with him freely, and the commission price was over 8000 yuan / month. At that time, the price of the same type of housing sold by the owner was 7500 yuan / month.

At the same time, put forward the "quality renting" freely, will also carry out the "standardized decoration" of the house. Zhu Hongyu told the twenty-first Century economic report that the furniture and appliances in the room were slightly outdated at first, but they did not affect the normal use. We can replace the air-conditioner and fridge in the room and replace the whole furniture with "standardization".

Hu Jinghui believes that this series of operations makes the cost of "free" become heavier, and the rent level must rise continuously to cover these costs. "In many of the long rental apartment operators' financial models, the default rent level has risen by about 10% a year."

In fact, renting after the renovation of the housing source and overlaying the brand effect of the operators will help to raise the price itself. Many homeowners reflected that after being free, the rental price of housing is higher than that of previous hundreds of dollars.

But overall, the market trend does not seem to support this sustained growth expectation.

According to the data of Shell Research Institute, the average monthly rent in Beijing in January 2012 was 51.3 yuan / m2 / month, 84.4 yuan / m2 / month in June 2020, and 64.7% in eight and a half years. During this period, Beijing experienced two rapid rents. One is 2013, the two is 2016 -2018, the average monthly rent growth rate is over 10%. However, the rent level in Beijing has been negative year-on-year since August 2019.

In a sense, this is the result of adjustment after the barbaric growth of the leasing industry.

Zhuge Search Research Institute believes that in 2019, the long rental apartments continued to explode, the false housing supply, group renting and other chaos frequently occurred, leading to the gradual strengthening of the regulation of the rental market, many cities set up a special group to rectify the rental market. "Institutions take low rent to attract tenants to stay, and landlords are quick to rent houses, and they are forced to lower their rents with the market."

At the same time, the rising level of pre rent level has overdrawn consumption ability to a certain extent, and the market is also adjusting itself.

Growth dilemma

In fact, from the second half of 2019, the operators of the long rental apartments, such as free apartments, apartments and eggshells, negotiated price cuts with some of the landlords, but at that time they were not the traditional peak season for leasing. The concern aroused by the move was not high, and the owners did not show a strong rebound.

The reason for the continued rash of the rent reduction is that, apart from the larger price range and wider scope, the compensation conditions for decoration, furniture and so on have also been put forward. Many owners believe that this requirement lacks basis.

A trusteeship contract obtained by the economic report reporters in twenty-first Century showed that the contract had agreed on the unilateral breach of contract, but it was necessary to pay the "loss of decoration" and "new allocation loss" if the owner broke the contract or the owner violated some provisions of the contract.

Li Song, partner lawyer of Dongyuan law firm in Beijing, believes that despite the fact that there has been no negotiation in this round of rent reduction, the owner has no breach of contract or breach of contract terms, so there is no need to pay the cost.

A well known employee told the twenty-first Century economic report that in recent years, it has been expanding rapidly, but now the cost is reduced by default. This shows that the company is facing serious problems.

Public information shows that since January 2018, four rounds of financing have been completed. Excluding the undisclosed A+ rounds, the remaining three rounds of financing raised a total of more than ten billion yuan.

However, the reality of low rental ratio in China also makes it difficult to form an effective business model. Public data showed that from 2015 to 2017, the cumulative loss in 3 years was nearly 1 billion 300 million yuan. But since then, it has not released any relevant data.

The long rental apartment brands that have been listed are all losing money without exception. From fiscal year 2017 to fiscal year 2019, green Guest Apartments lost 245 million yuan, 499 million yuan and 498 million yuan respectively. Similarly, from 2017 to 2019, eggshell apartments lost 270 million yuan, 1 billion 370 million yuan and 3 billion 437 million yuan respectively. In the first quarter of 2020, the eggshell cost 1 billion 234 million yuan.

Hu Jinghui said that even without the impact of the epidemic, the rent reduction storm will also emerge, which is behind the growth dilemma of the leasing industry.

In recent years, with the urbanization process entering a new stage, the relocation of industries and population in some hot cities, coupled with the slowdown in economic growth, will have an impact on leasing demand.

Hu Jinghui said that the rental demand and rent level of the hot cities could not go up all the time.

Hu Jinghui thinks that long rental apartment has scale effect, but it is a long cycle and low rate of return on investment. It needs scale, time and meticulous management to achieve value. Although capital commitment helps to rapidly scale, it can not solve the problem of return on investment. On the contrary, the larger the scale, the greater the pressure and deficit.

The emergence of the rent reduction storm, whether it can calm the industry from fanaticism, needs to be observed at the moment, but the influence of ease has emerged. According to the twenty-first Century economic report, many owners have considered that the cost of litigation is too low to consider that they can not maintain high prices. They choose to negotiate rent reduction freely, but many owners choose to cancel the contract and claim that they no longer believe in it. At the same time, due to more vacant housing, currently in many areas of Beijing has ceased collection.