You are here

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

Sunday, June 19, 2016 - 20:59
5144591 - 17_11_2006.jpg

[HONG KONG] China's home prices rose at a faster pace in May, supported by quicker growth in second-tier cities and a broader recovery in smaller cities.

The recovery in China's property market since late last year has been a rare bright spot in the world's second-largest economy, which has been slowing amid weak demand at home and abroad, cooling investment and excess industrial capacity.

But eye-popping home price rises in the biggest cities have raised fears of overheating, and growing debt levels are adding to worries for policymakers and risks for banks.

Average new home prices in 70 major cities climbed 6.9 per cent last month from a year ago, accelerating from April's 6.2 per cent rise, according to Reuters calculations based on data from the National Statistics Bureau (NBS) on Saturday.

The NBS data showed 50 of 70 major cities tracked by the NBS saw year-on-year price gains, up from 46 in April. "The average growth of new homes in first-tier cities started to narrow, while it continued to widen in second- and third-tier," Liu Jianwei, a senior statistician at the NBS, said in a statement accompanying the data.

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

On a month-on-month basis, however, prices in Shenzhen were up just 0.5 per cent, slowing from a rise of 2.3 per cent in the previous month and evidence that property cooling measures introduced in some big cities recently are starting to bite.

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

Shanghai prices rose 27.7 per cent on-year, slightly slowing from 28 per cent in April. Month-on-month gains cooled to 1.9 per cent from 3.1 per cent in April.

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

REUTERS