China home prices rise
faster in May as smaller cities join rally
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[June 18, 2016]
By Clare Jim
HONG KONG (Reuters) - Sizzling home price
rises in China's biggest cities showed signs of easing in May but sharp
gains appeared to be spreading to smaller cities, making policymakers'
job harder as they look to support the faltering economy without
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.
Average new home prices in 70 major cities climbed 6.9 percent last
month from a year ago, accelerating from April's 6.2 percent rise,
according to Reuters calculations based on data from the National
Statistics Bureau (NBS) on Saturday.
The NBS data showed 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 downpayment requirements for
second homes and raised the eligibility bar for non-residents to
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 megacities 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.
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A woman walks past a residential compound in Beijing's Tongzhou
district, China, February 25, 2016. REUTERS/Jason Lee
The spillover of higher prices to major second-tier cities is fuelling
speculation that local governments there may also tighten restrictions on home
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.
But CITIC Bank's Liao said he did not expect widespread tightening across the
country just yet, saying overall prices in second-tiers were still well below
those in top cities.
Some small cities which have a glut of unsold homes may even need continued
support to encourage homebuyers, he added.
China's top banks are lending more to homebuyers and developers than at any time
since at least the global financial crisis, making them vulnerable to a property
market downturn if prices overheat.
Investment growth in Chinese real estate slowed in May for the first time since
December on a year-on-year basis as tightening measures in big cities took their
China's housing market is a crucial engine of growth, accounting for around 15
percent of gross domestic product. Authorities hope a healthier property market
will help support growth, even as the broader economy continues to decelerate.
(Reporting by Clare Jim; Editing by Kim Coghill)
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