First-Tier Chinese Cities Post Home Price Gains

by on December 18, 2013 4:53 pm GMT

Chinese first-tier cities post increases in new home prices, with Shenzhen posting a three-year high. According to the National Bureau of Statistics, both Guangzhou and Shenzhen seen gains of 21 percent year-over-year while, Shanghai and Beijing gained 18 and 16 percent respectively. New home prices rose in 69 of the 70 cities tracked.

“Home prices in major cities have already become unaffordable; the impact of the local-level property measures is not very strong, we’ve seen similar policies before,” said Yao Wei, an economist specializing in China at Societe Generale.

There is worries of a housing bubble in China (and Hong Kong), but the Chinese government is leaving housing sector policy to local governments to try and contain prices from running out of control. For instance, local governments have issued policies that require a higher down-payment for second home purchases in some first-tier cities.

The Chinese government is changing their position on trying to deter demand by focusing on the long-term outlook of the housing market.

The four first-tier cities (mentioned above) are “characterized by high levels of international business connectivity, deep corporate bases and well-developed international grade stock, and they are the country’s most liquid and transparent markets,” according to brokerage Jones Lang LaSalle Inc. This is a reasonable assertion on why prices have rallied particularly in these cities.

Existing homes prices have also increased. Shenzhen and Guangzhou existing home prices rose 15 and 12 percent. Beijing and Shanghai have seen 20 and 15 percent increases.