Summary of Key Points
In the first half of 2026, there were signs of recovery in the national residential rental market: overall rents continued to decline slightly, but the rate of decline narrowed significantly. First-tier cities led the way in stopping the downward trend and experiencing a rebound, while second-, third-, and fourth-tier cities are still adjusting, though their potential for further decline is limited. The focus on providing affordable rental housing has shifted from "mass construction" to "targeted support," reducing the pressure on market rents. The influx of graduates and population has created robust demand, leading to a market that is moving from widespread declines to more differentiated recovery. In the future, the emphasis will be on improving the quality of rental properties rather than simply expanding their quantity.
Detailed Analysis
1. Rent Trends: Overall Decline Slows, with First-Tier Cities Leading the Recovery
Rents in 50 key cities across the country fell by a cumulative 0.56% in the first half of the year, but this was 0.83 percentage points less than the same period last year, indicating a slowdown in the decline. Rent increases of 0.08% were recorded in June, marking the second consecutive month of growth (the first being in March due to the return to work).
Notable Divergence: Rents increased in 8 cities, including Shanghai and Shenzhen (an increase of 7 compared to last year), with first-tier cities experiencing an average annual rise of 0.6%, ending two years of decline. Shanghai, Beijing, and Shenzhen have seen monthly price increases for four consecutive months. However, rents still fell in 42 cities, though only 7 experienced declines of more than 2%. The overall trend of rent reductions was mild across most cities.
2. Demand Side: Graduation Season and Population Influx Boost Market Demand
- Graduation Season Demand: There were 12.7 million graduates in 2026, the highest number on record, who primarily sought employment in first-tier and highly developed second-tier cities due to their robust industrial bases and abundant job opportunities, leading to concentrated rental demand.
- Population Migration: The core 15 cities added 980,000 permanent residents in 2025, with cities like Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, and Chongqing seeing over 4 million new migrants. This continuous influx of young people has significantly boosted rental demand, stabilizing the rental market in these areas.
3. Supply Side: Affordable Rental Housing Focuses on Quality, Reducing Market Pressure
The "14th Five-Year Plan" called for the construction of 6.5 million units of affordable housing, but actual construction exceeded this target with 8.7 million units built. Affordable rental housing is priced 20%-30% lower than market rates, previously dragging down overall rents. The "15th Five-Year Plan" does not set mandatory targets for the number of units to be built; as a result, local governments have significantly reduced their targets (e.g., Guangzhou from 100,000 units to 30,000 units, Shanghai from 70,000 units to 12,000 units, and Wuhan and Zhengzhou also made significant reductions). The focus has shifted from building more units to providing targeted support (e.g., for new residents and young people), thereby reducing the pressure on market rents and creating room for price increases.
4. New Market Phase: Moving from Expansion to Quality Improvement
2026 marks the beginning of the "15th Five-Year Plan," and the rental market is transitioning from a focus on expansion to improving quality and regulating operations:
- Government policies are addressing both supply and demand, with efforts to activate idle housing stock and optimize the structure of affordable rental housing. On the demand side, measures are being taken to help new residents and young professionals reduce rental costs.
- Private landlords are also beginning to prioritize service quality, such as improving property conditions and standardizing rental processes, rather than simply focusing on quantity.
5. Future Trends: Continued Differiated Recovery, with First-Tier Cities Stabilizing
The market recovery will not be uniform; some areas will see price increases while others may continue to decline:
- First-Tier and Highly Developed Second-Tier Cities: With strong economies and ongoing population growth, rental demand is stable, and rents are expected to continue to recover.
- Second-, Third-, and Fourth-Tier Cities: Although still adjusting, the potential for further declines is limited, and market conditions are expected to stabilize as local demand grows. Overall, the rental market is moving from a "cold winter" towards a "warm spring," though the pace of recovery varies by city.
Conclusion
The recovery of the rental market is not an immediate process, but the signals are clear: first-tier cities are leading the way, followed by second-, third-, and fourth-tier cities. Affordable rental housing no longer competes with the market on a quantitative basis; instead, demand provides support for these properties. For tenants, rent costs in first-tier cities may increase slightly, while in second-, third-, and fourth-tier cities, there is still room for negotiation. For landlords, properties in first-tier cities are more likely to retain their value, while those in second- and third-tier cities need to focus on quality to attract tenants. In the future, the rental market will be more targeted, providing suitable housing to those in need rather than simply constructing more units.