Long-term rental apartments have been bursting at the seams in recent years.
“On January 8, the Chinese official media reported the remarks of SOHO China Chairman Pan Shiyi at an online conference under the headline “Cannon”, reminiscent of his friend Ren Zhiqiang, a real estate developer known by public opinion as “Ren Cannon”.
Pan Shiyi: Long-term rental apartments are the embodiment of a Ponzi scheme
On January 8, SOHO China Chairman Pan Shiyi said during an online conference that at the end of April 2020, the company’s performance slipped to an all-time low, with many client companies and stores struggling to operate, “Our surrendered rent area, the amount of fees owed, is the largest since the company was founded.”
Pan Shiyi said, “In May last year, the company’s colleagues proposed two sets of programs, from the compression of costs, a set of salary cuts, a set of staff reduction, we finally decided to strengthen the rental, to attract those who are more risk-resistant quality customers to fill the area returned to rent.”
“Small and medium-sized companies can’t hold up and collapse the fastest, with an avalanche of surrendered rentals. We have implemented a new policy from the second half of last year …… at the same time to prevent fraudulent companies from coming in, what P2P, hair what what companies, in our own projects, Bund SOHO and Bank SOHO are very much affected by these illegal fund raising P2P companies, mainly the stability and financial impact is relatively large “, said Pan Shiyi.
The official media “China Securities Journal” with “Pan Shiyi put the gun: do long term rental apartments of non-foolish that is cheat! Vanke and other real estate enterprises are laying out” as the headline reported that Pan Shiyi said at the meeting that about 5 years ago, he also studied the business model of long term rental apartments, and his final conclusion was – under the current financial and tax environment, there are mainly two types of people doing long term rental apartments, one is a liar and the other is a fool. They are crooks who don’t think about the long-term development, they just cheat on a sum of money; fools who don’t understand the accounts, the rental return of office buildings is more than 3%, the return of apartments is about 1%, and the interest rate of bank loans is at least 4%-5%.
Pan Shiyi said, “If you borrow the bank’s money, build a house and then rent it out, and rely on the rent to cover the cost, you don’t understand the account. Therefore, long term rental apartments are a reflection of the Ponzi scheme in the real estate market.”
And just 10 days ago, Vanke, a real estate developer, expressed its bullishness on long-lease apartments in an interactive platform. Vanke said that long-lease apartments are an important channel to solve the housing problem, and the company is optimistic about the long-term future of the business. Centralized apartments are in high market demand and in line with the policy direction of rent-to-buy, and the company will remain steadfast in promoting the business.
Long-term rental apartments are an emerging industry in China’s real estate market in recent years. Long-term rental apartment operators rent out owner-occupied houses, renovate them, furnish them with furniture and appliances, and rent them out to people in need in the form of single rooms. Long-term rental apartments in China are mainly divided into two types: “centralized” and “decentralized”. The centralized type is mainly operated in the traditional commercial real estate mode, using self-owned land development or building renovation; the decentralized type is mainly extended from the leasing agency business, relying on the integration of the head of household housing to redecorate and manage, similar to a “second landlord”.
Last month’s economic work conference of the Central Committee of the Communist Party of China proposed, “to adhere to the positioning of the house is used to live, not for speculation. To attach great importance to the construction of secure rental housing, accelerate the improvement of long-term rental housing policy, standardize the development of long-term rental housing market ……”.
However, the long term rental apartment as a representative of the rental market is constantly bursting with mines. The industry insiders bluntly say that the large-scale long-lease apartment capital chain break, there will be owners evicted tenants, millions of millions of people will be homeless, the consequences are more serious than P2P burst.
Pan Shiyi’s “Ren Da Cannon” has been silenced
The official media reported Pan Shiyi’s case under the headline “Cannon”, reminding him of his friend Ren Zhiqiang, who is known as “Ren Cannon” in public opinion. Pan Shiyi was once known as a star in the real estate industry, along with Ren Zhiqiang.
Ren has always been known for his outspokenness, and his views on real estate have been widely discussed every time he speaks. Regarding the distribution of the dividends from the “real estate pie”, Ren expressed the same view in the early years that the bulk of the profits are not in the hands of real estate developers, and that the average profit rate of the real estate industry is very low in the past few years, and the government has taken most of the profits.
In March 2020, Ren was expelled from the Communist Party and sentenced to 18 years in prison after he wrote an article criticizing the Chinese Communist Party for concealing an epidemic that caused a global pandemic and insinuating that Xi Jinping was “a clown who insists on being the emperor even after stripping him naked.
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