Date
17 January 2017
Shenzhen has shown the highest home price growth to as much as 53.2 percent from a year earlier but slower than the 62.4 percent rise in April. Photo: Bloomberg
Shenzhen has shown the highest home price growth to as much as 53.2 percent from a year earlier but slower than the 62.4 percent rise in April. Photo: Bloomberg

China home prices rise faster in May, smaller cities join rally

Home price growth in China’s biggest cities is showing signs of easing but sharp gains appear to be spreading to smaller cities.

The trend is making it harder for the government to craft policy to support the faltering economy without inflating bubbles, Reuters reports.

Average new home prices in 70 major cities climbed 6.9 percent in May from a year ago, rising from a 6.2 percent rise in April, according to Reuters calculations based on data from the National Statistics Bureau (NBS).

The NBS data, released on Saturday, shows 50 of the 70 major cities it tracks saw year-on-year price gains, up from 46 in April.

“The average [price] growth of new homes in first-tier cities started to narrow, while it continued to widen in second and third-tier,” said Liu Jianwei, a senior NBS statistician.

The southern city of Shenzhen remained the top performer, with prices surging 53.2 percent from a year earlier, slower than the 62.4 percent rise in April.

But on a month-on-month basis, prices were up just 0.5 percent after April’s 2.3 percent rise, evidence that property cooling measures introduced by some big cities recently are starting to bite.

Shenzhen and Shanghai have tightened down payment requirements for second homes and raised the eligibility bar for non-residents to purchase properties.

Shanghai prices rose 27.7 percent on year, easing from 28 percent in April. The monthly gain cooled to 1.9 percent from 3.1 percent.

“Easing growth in first-tier cities is a good thing, preventing a bubble from inflating,” said Liao Qun, China chief economist of CITIC Bank International in Hong Kong.

While the cooling trend in mega cities may be good news for policymakers in Beijing, the survey showed sharp price rises are now spreading to other parts of the country.

The coastal city of Xiamen surpassed the top-tier cities and saw the second highest price rise of 28 percent.

Prices in second-tier cities Nanjing and Hefei also rose over 20 percent, more than the 19.5 percent seen in Beijing.

The spillover of higher prices to major second-tier cities is fuelling speculation that local governments there may also tighten restrictions on home purchases soon.

The government of Tongzhou, the eastern suburban district of Beijing, tightened rules last month on purchases of second homes. The eastern cities of Nanjing and Suzhou have put limits on how much developers can offer in land auctions.

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