Reuters BEIJING (Reuters) — Home prices leveled off in China’s biggest cities in May but continued to climb nationwide, indicating demand remains resilient despite a series of government measures to keep the market from overheating.
Firm price gains highlight the challenge Chinese authorities face in calming a frothy market without disrupting the economy, in which real estate is a major driver of growth.
Economists say the pace of price growth across different market tiers clearly shows a passing of the baton from the center to the regions. They also fret over still-rising prices against an already high base, saying upward price pressure remains.
“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.
“We expect more cities to impose curbs in the future.”
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.
Compared with a year ago, new home prices rose 10.4 percent in May, easing from a 10.7 percent gain in April, Reuters calculated from National Bureau of Statistics (NBS) data.
Policymakers have prioritized stabilizing an overheated market ahead of a Communist Party reshuffle later this year, reiterating the need to avoid dramatic price volatility that could threaten the financial system and harm social stability.
The housing bureau in Guangdong province’s Qingyuan city said last week prices for pre-sold new units must be sold at no more than 5 percent higher or no more than 15 percent lower than in similar projects in the area in the past month, effectively setting a price cap and floor to stabilize the market.
The NBS said price growth for new homes in China’s 15 most overheated cities — mainly provincial capitals with the most stringent curbs — has remained “basically stable” from the previous month as city-based control measures continued to take effect.
Prices for new homes in China’s biggest cities such as Beijing and Shanghai stopped climbing in May on a monthly basis, while prices fell 0.6 percent in Shenzhen, the fastest seen in three months.
Compared to a year ago, Beijing, Shanghai and Shenzhen prices still grew 13.5 percent, 11 percent and 5.4 percent, respectively.
The actions of authorities, who also stressed the need to actively push for inventory destocking in smaller cities experiencing a housing glut, have spread investor activity more broadly rather than halting it outright.
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.
For example, Bengbu, a midsize city in central China’s Anhui province, topped the list in May, with prices of new units rising 3.4 percent on-month, compared to a 2.2 percent gain in April.