Beijing landlords want to price-gouge visitors for the Olympics

Katie and I want to move to the Central Business District (CBD) or Sanlitun this summer. In other words, we want to sign a short-term lease that overlaps with the Beijing Olympics. But it looks like I may end up commuting to work from Haidian, a 90-minute journey that involves one bus , two trains, millions of people, and the furnace-like Beijing summer heat. The problem, of course, is the Olympiad.

We have discovered that many Beijing landlords are looking to cash in on the games, and in a manner that far exceeds expectations. We currently rent a 114 sq. meter apartment within 10 minutes of the main Olympic venues for 4600 RMB a month, or about $647 USD. But our landlord thinks that she can earn between 20,000 and 40,000 RMB during the Olympic period if we move out. We thought this seemed high, but Nancy is actually on the low end of the spectrum compared to some landlords in CBD or Sanlitun.

CBD and Sanlitun are both located at least an hour from the Bird's Nest, on the east side of Beijing. Travel from either area to the Olympic venues will involve a lengthy subway ride in that same summer heat I mentioned above. Nevertheless, many real estate agents we have spoken with have asked us to pay $8,000 USD to rent a place for August. This price is ten times the market rate in Haidian, an area much closer to the actual festivities, and for apartments that are neither serviced by maids, nor staffed by hoteliers that can provide directions in the tenants' lingua franca. When a seller increases rates far beyond what is considered a "fair" price in this manner, in America it's often referred to as price gouging. But when they do it in Beijing, apparently it's called bargaining.

To combat this sort of behavior, the Beijing government has signed up about 1,000 families to serve as hosts to foreign visitors. But between 500,000 and 2 million are people expected to visit Beijing for the Olympics, and most of the major hotels are already sold out. True, Beijing has a capacity of 300,000 hotel rooms, but many of those rooms are not in Western-style hotels. And, I'm sorry to say, most Western visitors would not be willing to "slum it" in the other 200,000 or so sub-optimal rooms. So there's a crunch coming.

The landlords see themselves as a safety-valve of sorts--a money-hungry, profiteering safety valve. But these landlords are probably going to have a few problems on their hands, or at least I hope they do.

First of all, the short-term rental market for August has not yet hit an equilibrium price, so most landlords don't yet know what visitors are willing to pay. And I find it hard to believe that someone that just spent $5,000 on a plane ticket will pay more to rent an apartment for a month in Beijing than they would pay to rent an apartment in Manhattan, Olympics or not. Instead, I expect smart visitors to wait it out until right around August 8th when landlords start to realize that they can't cash in. And there's nothing like a fire sale to find some decent bargains.

Second, and I might be wrong about this, but I'm pretty sure that most foreigners renting apartments will be entering China on an L visa, a visa that does not allow its holder to enter into short-term leases. Imagine, then, if all of these landlords march down to the local Public Security Bureau at around August 4th to help their new Caucasian tenants register under China's hukou system, as required by Chinese law. The lines will be ridiculous, the lies will be outlandish, and the rule of law initiatives will seem almost comical if the local PSBs let it happen. And there's only so many Chinese people who can claim that they're just just letting some friends crash in their apartments for the games before it gets out of hand.

As such, I think things are about to get a little interesting in the rental market, at least in Beijing.