Chinese Banks Launch Financial Intermediation Services for Long-term Home Leasing

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Banks in China have launch an innovative form of  long-term home leasing arrangement amidst ongoing efforts by Beijing to expand the urban rental market.

On 28 March the China Construction Bank Guangzhou Housing Financial Services Center  (中国建设银行广州住房金融服务中心) formally opened, with the goal of providing financial services across the full real estate lifecycle, including construction, purchase, sale and leasing.

The Center will serve as a hub for trials in the Guangzhou area of bank “cun fang” (存房), a new form of financial intermediation service first launched by CCB in January of this year that has been touted as a form of “immobile asset wealth management.”

Wu Jirong (吴集荣), vice-head of CCB’s Guangdong province branch said to Guangzhou’s The Time Weekly that the goal of the new cun fang operations is to “take action on the supply side, innovate models for long-term home leasing supply, activate society’s idle housing resources, and resolve difficulties with respect to long-term leasing.”

Cun fang involves CCB “taking on the role of resources integrator and financial services provider, with a specialist home leasing company responsible for actual operations.

“CCB possesses unique and specialist valuation advantages, so that when landlords propose cun fang, we can provide a specialist valuation of a property’s rental returns over the next 3 – 10 years.

“Once the landlord approves, we will then arrange for the landlord to conclude a housing long-term leasing rights transaction with a real estate company, with the real estate company responsible for providing future long-term leasing rent to the landlord in a one-time payment or via payment in instalments, as well as for leasing out the property and post-leasing management.

“Once the transaction term concludes, the real estate company will return the property to the landlord.”

The launch of the new arrangements comes just as Beijing pushes for the expansion of China’s home leasing market, in an effort to contain surging housing prices as well as limited urban supply .

The report for the 19th National Chinese Communist Party Congress held in October last year stressed the need to “uphold the [principle] that homes are for occupation, not speculation,” as well as establish a residential housing system that places equal emphasis upon both leasing and purchasing.

Figures from the China Index Academy indicate that by 2030 China’s home leasing population will reach 270 million, with a market value of up to 4.2 trillion yuan, or four times the current figure.

At present, however, rental accommodation provided by the government or home leasing companies accounts for under 10% of the home leasing market in Chinese cities, as compared to between 20 – 30% in many advanced economies.

 

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