Abstract: Real estate is either essential material for production and living or expensive investment goods. This paper discloses that renters of real estate are virtually real estate investors, and the core role of modern real estate industry is a result of evolutions of labor division. This research discovers that renters of real estate have a substitution effect for real estate investment by transferring direct investment on real estate to investment on real estate leasing companies. This paper points out that this effect helps to abate a conflict between supply and demand on real estate asset market, increase effective real estate service supply, form real estate tenure choice mechanism, and make sense for solving the problem of too fast increasing of housing price and high empty rate of sold residential real estate in China.

Key words: real estate rental, real estate investment, investment substitution