China home prices up in fewer cities amid curbs

China’s aggressive efforts to tamp down a surging housing market seem to be working

China’s aggressive efforts to tamp down a surging housing market seem to be working

Compared with a year ago, new home prices rose 10.4 percent in May, slowing slightly from an 10.7 percent gain in April, Reuters calculated from National Bureau of Statistics (NBS) data.

Average new home prices in China's 70 major cities rose 0.7 percent in May from the previous month, in line with April and remaining the quickest gain since October, Reuters calculated from an official survey out on Monday.

"While a moderation in price growth in first- and second-tier cities shows the curbs had some effects, we must note that prices are still rising with new unit prices at record high levels", said Sam Xie, head of research at property services provider CBRE China.

Investors, banned from the hottest markets, are increasingly looking inland, driving up prices in more remote, smaller cities with fewer buying restrictions, leading to a surprise pick-up in May sales.

"Prices of newly built homes in 15 major cities including Beijing, Shanghai and Shenzhen continued to stabilize in May on the back of targeted local government policies", said NBS statistician Liu Jianwei.

Month-on-month prices in those cities moderated from a rise of 0.1 percent in April to a growth of just below 0.05 percent in May.

"For instance, in the four first-tier cities, year-on-year price growth of new and pre-owned houses both fell for the eighth consecutive month in May".

29 cities saw slower price increase year on year in May while 15 of the top-tier cities lost almost 3 percent to a year on year increase of 16.2 percent. In year-on-year terms price growth for most major cities slowed as well.

Xia Dan, a senior researcher at the Bank of Communications, predicted prices in previously red-hot markets like Beijing would continue easing. In May, growth was 10.4 percent. Beihai, in southern Guangxi, saw prices advance 3.2 per cent. Property sales pertaining to floor space edged up 8.3 percent year on year in May compared to a 14.3 percent year on year gain for the January to May period while increase in terms of value on a year on year basis grew 12.6 percent in May compared to 18.6 percent January to May.

Smaller cities also restraint population inflows and have less residential second-home markets, making the current increase in prices there limited.

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