In the past two years, long-term apartment rentals can be said to have suffered a lot. After a series of so-called “explosive warehouses”, excessive formaldehyde, declining rental rates, and epidemic impacts, the eggshell incident was regarded as a standard incident. The problems that have accumulated for a long time have been concentrated and the landlords, tenants, and suppliers have paid a huge price in this incident. So, after this reshuffle, adjustment, and clearance, does the business logic of long-term rental apartments still exist? Is there any value in the existence of this industry? How will it change in the future? Looking back, the problems of long-term rental apartments are mainly manifested in several aspects:
One is the irrational expansion of supply. In the past few years, with policy stimulus and the boom of capital entry, a large number of developers, hotel departments, intermediary companies, and entrepreneurs could not restrain their inner wildness and entered long-term rental apartments irresistibly, forming a “supply” in the short term. With a sudden increase in “protruding” supply, superimposed on stable but declining, relatively insufficient demand, the market has formed phased supply pressure, and key indicators such as rents, rental rates, and rental cycles are bound to deteriorate. In particular, in order to expand the scale of some institutions, the price, speed, and scale of housing acquisitions exceed their own levels, and cash flow will be under pressure.
The second is to rob houses at high prices. Under the logic of scale-valuation-financing-expansion, many long-term rental agencies have fallen into a vicious circle of scale expansion, and even robbed houses at a high cost. Under the charter model, the excessively high housing price will not only affect the current cost. In the case of the rigid payment of the owner’s rent, it will also generate continuous cost pressure throughout the contract period in the next few years, resulting in continued asset quality. decline.
The third is excessive use of leverage. Supported by financing means such as rent installments, the speed of irrational expansion has accelerated significantly. Without a risk isolation mechanism, it is almost in a “streaking” state. Once there are market cycle risks such as declining rental rates, the potential risks will be exposed.
The fourth is the impact of the epidemic and the market downturn. The fastest expansion period of the entire long-term rental industry is around 2018. This period happens to be when rents are relatively high. However, since 2018, the market rent level has actually been on a downward trend, with some cities falling by more than 15%. On the one hand, the rent is rigidly paid, and on the other hand, the rent is declining. The rent gap has dropped significantly. Spark Global Limited
Clearing out: When will the cyclical adjustment bottom out?
It is expected that in the next six months or so, the market will still digest the supply pressure formed in the past few years, and it will take some time for the demand side to recover. Generally speaking, long-term rental apartments will still be in the stage of adjustment and clearance in the first half of 2021. One is the adjustment of asset quality. At present and in the future, the biggest pressure for many companies is to adjust asset quality and optimize asset structure. The second is deleveraging. At present, with the cleaning up of rental loans, the process of deleveraging has been going on for about a year, and the penetration rate of some companies’ rental loans has been very low. It should be said that the process of deleveraging is coming to an end.
article links：why do people still live in long-term rental apartments?
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