(Yicai Global) July 7 -- Apartment rental prices in China’s major cities dropped on average in June from the month before as demand remained lackluster despite a record number of college graduates coming on the employment market this year, according to a recent report.

There was little activity in the rental housing market in June due to a sluggish job market which caused rents to dip although the market stayed mostly stable, according to a report by think tank Zhuge Housing Data Research Center.

Rents in China’s medium-sized and large cities fell 0.01 percent in June from May and slumped 0.5 percent from the year before to an average of CNY35.46 (USD4.90) per square meter per month.

In the largest first-tier cities of Shanghai, Beijing, Guangzhou and Shenzhen, rents only climbed in Beijing, while Shanghai and Guangzhou logged some of the biggest declines.

Beijing’s rents gained by 1.35 percent in June from May. But, on average, rents in the first-tier cities slid 0.29 percent month on month although they gained 0.27 percent year on year to an average of CNY88.15 (USD12) per sqm per month, according to the report.

By contrast, rents in second-tier cities climbed in June from May as rental markets in cities such as Wuxi, Suzhou and Hangzhou, which are part of the Yangtze River Delta economic hub, became more active. On average, rents in these cities advanced 0.1 percent from May and dipped 0.71 percent from a year earlier.

A number of graduates are choosing to work in second-tier cities or have returned to their hometowns as economic growth slows, the report said. This has driven up rents in the second-tier cities. Some of these metropolises, such as Hangzhou, are actively trying to attract more skilled workers, which has boosted local rental demand to a certain extent.

Rents in the smaller third and fourth-tier cities stayed the same as May at CNY24.01 per sqm per month, which was a year-on-year dip of 0.93 percent.

Shifts in Demand

A landlord in Shenzhen has noticed the change in the rental market. In the past three years, she was usually easily able to find a tenant for her three-bedroom apartment in Longhua district, which she rents out at CNY7,000 (USD966) a month. But the apartment has now been empty for over a month, she told Yicai Global.

July is usually a peak season when college graduates look for homes to rent, but there are very few fresh graduates viewing her apartment this year, and most visitors are families, she added.

The five cities that posted the largest increases in rents from May were Suzhou, Beijing, Hangzhou, Wuxi and Xiamen. They are all second-tier cities with the exception of Beijing. Suzhou’s rents grew at the fastest pace at 1.52 percent, the report said.

While the five cities with the biggest month-on-month declines were Taiyuan, Shanghai, Zhuhai, Chengdu and Guangzhou. Taiyuan in northern Shanxi province recorded the largest drop at 2.97 percent.

The big drop in rents in Shanghai last month may have to do with a greater supply of subsidized rental housing in the city, the report said.

Editors: Tang Shihua, Kim Taylor