BEIJING - The demand for apartments in China's first-tier cities continues to boom despite the soaring cost of rent, driven in part by the government's stricter policies for home purchases and the large numbers of migrant workers who came to big cities after the Spring Festival holidays.

By January, the country's real estate rents had risen by 7.1 percent above what they were a year earlier, according to figures released by the National Bureau of Statistics on Feb 15.

"My landlord has charged an extra 200 yuan ($30) a month and we have to accept it, since the whole city's rents are rising in February," said Davis Wang, who recently renewed a rent contract that obliges him to pay 2,750 yuan a month for a two-bedroom apartment he shares with a friend in Beijing.

"It has become more and more difficult for non-Beijing residents to settle down here because of the increasing cost of living, especially the increasing housing prices," Wang, who has worked in Beijing since 2009, told China Daily on Sunday.

In the capital, non-Beijing residents are not allowed to buy an apartment until they have paid their monthly income taxes or social security fees for five consecutive years, according to new regulations released by the Beijing government.

The latest rules, which took effect on Thursday, also stipulate that people with Beijing hukou (permanent residence permits) will be allowed to have two properties while non-locals who meet other qualifications will be limited to one apartment.

Studies from the marketing department of Woaiwojia, a large real estate agency selling second-hand homes in Beijing, show that more than 30 percent of potential buyers will be affected by the measures meant to deflate bubbles in property values.

About 64.5 percent of the city's second-hand property buyers do not have a Beijing hukou. And fewer than half of them can prove they have paid taxes for five years, the house agency said in its official blog on sina.com.

"Many people have been prevented from buying an apartment," Hu Jinghui, vice-president of the company, was quoted by Guangzhou-based Yangcheng Evening News as saying. "So more and more are turning to the rental market."

The situation is similar in China's economic hub, Shanghai, which in 2010 ranked as the 24th most expensive city in the world to rent a house in, according to the latest report released by ECA International Ltd, an international human resources consulting firm.

The house-leasing business has been booming in Shanghai since the fourth quarter of 2010. By February, rents had risen from 5 percent to 15 percent, according to Shanghai Deovolente, a local property agency.

In South China's Guangzhou city, the average rent price rose to 2,530 yuan a month this January, which is near to the highest price recorded in 2010, according to Yangcheng Evening News.

"The government has to impose stricter restrictions on home purchases, since many big cities in China are overloaded," said Li Chang'an, associate professor with the school of public administration at the University of International Business and Economics.

But the ban should only be temporary, Li said. Otherwise, it may lead to other social problems such as social instability and a loss of talents, both of which will impede the expansion of big cities.

China Daily

(China Daily 02/22/2011 page4)