(Yicai Global) Aug. 20 -- Whether long-term rental apartments have contributed to the recent surge in rents in Beijing and other first-tier cities has became ahot topic this weekend. Hu Jinghui, vice president of B.A. & 5I5J Group and head of 5I5J's research arm, resigned shortly after criticizing Ziroom,PurpleWutong (Beijing)AssetsManagementand other long-term rental housing operators for driving up prices.

Beijing'shousing and urban-rural development commissionand other regulators have held talks with directors of major rental companies including Ziroom, 1zu.comoperator XiangyuandPurpleWutong, which operatesDanke Apartment. Hu held a press conference yesterday after resigning.

China has finally managed to rein in commodity housing prices in first-tier cities afterissuingtough real-estate curbs. However, the battleground has now shifted to the rental housing market.

Competition has becomefierce between rental flat operators to snap uprental properties. Ziroom and Danke Apartment have been offering high prices to compete for rental properties, leading to a 20 percentrise in rents in just 10 days,one online commentatorsaid at NewSMTH.net, a student discussion forum of Tsinghua University, in a post that has been widely circulated onthe social networking platformMomentsof Tencent Holdings ubiquitous WeChat messaging and third-party payment app. Rumors that intermediaries have pushed up rentsareswirling.

Raising the Roof on Rents

Supply, demand and seasonal factorshave combined withthe flow ofa huge influx ofcapital into the long-term rental housing market topowerthe recent surge in rents in first-tier cities, Hu told media in a teleconference on Aug. 17. Long-term rentalapartmentoperators such as Ziroom and Danke Apartment are offering prices 20 percent to 40 percent higher than market to compete for rental properties, which they will refurbish beforere-leasing,furtherpushing up prices and disrupting home owners'mindsetsand the rental market, Hu said.

5I5J soon released a statement saying that the above comments represent Hu's own views and not the company's.

The Beijing Municipal Commission of Housing and Urban-Rural Development and the city's banking, finance and tax regulators jointly called a meeting with directors Ziroom, 1zu.com,Danke Apartmentand otherleading rentaloperators on Aug. 17 after media reports that some individual rental service providers have been pushing up prices tovacuumupvacant flats.

These agencies madeclear at the meeting that rental companiesmaynot engage in vicious competition to grab rental propertiesatabove-market-price offers using bankloans and other financing channels. Theymayalso notentice landlordsinto terminatingleases early by offering higher prices.

Hu announced his resignation as vice president of B.A. & 5I5J Group on WeChat Moments on Aug. 18. Beijing's housing officials called him and thanked him yesterday, he said at his press conference on Aug. 19. Long-term rental market irregularities will be even worse than peer-to-peer lending platform defaults, Hu stressed,recommending that Beijing impose a 10 percent tax on emptyunits.

First-Tier Fears

Shenzhen, Beijing, Guangzhou and Shanghai witnessed an annualrise of30percent, 22percent, 22percent and 16.5percent, respectively,in rents last month, according to housing price tracking websitecreprice.cnrun bymarket analystCityRe Data.

5I5J Holding Groupisdevelopingits rental business tohedgerisks stemming from its brokerage business,ittold investors at an interaction platform under the Shenzhen Stock Exchange yesterday in response to questionswhetherXiangyu, an apartment rental platform under 5I5J, has tried to snap up property listingsathigh prices andhas thuscontributed to higher rents.

Ziroom, a long-term rental apartment brand owned by HomeLink, raised CNY4 billion in A-round financing led by Warburg Pincus, Sequoia Capital China and Tencent Holdingsearlier this year, public information shows.

The deal,one ofthe biggest of its kindeverin China's long-term rental apartmentsector,values the company at over CNY20 billion(USD2.9 billion). Ziroom had more than 700,000units under management in the first half and aims to operate over 1 million by year'send, said Xiong Lin, its chiefexecutive.

Opinions are divided over whether long-term rental housing operators have snatched property listingsforhigh prices. However, most such operators arerunning at a loss in China, with a leading player losing more than CNY500 million in both 2016 and last year, Chinese news outlet the Economic Observer quoted an insider as saying.

Editor: Ben Armour