Salient to Investors:

Beijing’s strict property curbs are forcing up rents for 7.7 million residents originally from outside of the city who are blocked from buying a home.

Bacic & 5i5j say average rents in Beijing have risen 23 percent since 2010, as demand for rentals surged 82 percent – college graduates and migrant workers are suffering the most. SouFun said while Beijing’s home prices rose 4.9 percent.

Wang Zhenyu at China University of Political Science and Law said the rules are unfair and will deepen xenophobia toward non-locals.

Qu Anxin at Centaline said rents will keep rising, and at a faster pace in 2013 than in 2012, especially after the government’s new curbs. Centaline said Shanghai rents rose 6.5 percent in 2012 and 8.4 percent in 2011. Qu said returns on rental homes remain below the 3 percent deposit rate benchmark in the biggest cities such as Beijing, Shanghai and Shenzhen, restricting investment and supply in rental homes.

Shen Jian-guang at Mizuho Securities Asia said the government should rethink its property policy because home prices have barely been curbed, and the real demand for housing can’t be constrained.

The Chinese Academy of Social Sciences said 230 million people moved to cities from 2000 to 2011, the biggest urbanization in history.

Wei Li et al at Standard Chartered said the rent surge is not fully reflected in China’s inflation data because rental costs are underweighted in the official consumer prices basket, which is based on mortgage costs rather than actual rents.

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