Home prices of China’s popular second-tier cites increased sharply in July. Month-to-month growth of new home prices in eight second-tier cities such as Xiamen, Hefei and Nanjing surpassed the four first-tier cities including Beijing, Shanghai, Guangzhou and Shenzhen.
Hefei, Nanjing and Suzhou have recently tightened real estate policy in succession. Analysts say other second-tier cities whose housing prices rise excessively are also likely to introduce tightening measures to squeeze credit, restrict the emergence of land parcels with extremely high prices and prevent risks in the industry.
The National Bureau of Statistics (NBS) yesterday released the housing price data of 70 medium and large cities across the nation in July, which shows that prices of new homes in most of these cities went up, both on month-to-month basis and year-on-year basis. But the month-to-month growth of new home prices slowed down slightly.
Housing prices of second-tier cities gained momentum over the past few months, especially in July.
E-house China R&D Institute estimated that month-to-month growth of new home prices in first-tier, second-tier and third-tier cities had increased by 1.6 percent, 1.1 percent and 0.3 percent respectively in July, and that for June were 2.3 percent, 1 percent and 0.3 percent respectively. It means that the month-to-month growth for second-tier cities is expanding, while that of first-tier cities is narrowing.
“Since housing prices of first-tier cities skyrocketed, some investment and speculative capitals started to flee from first-tier cities and flow into second-tier cities. Therefore, growth of housing prices of some second-tier cities have exceeded first-tier cities,’ said Yan Yuejin, researcher with E-house China R&D Institute.
Statistics from the NBS show that eight cities, namely Xiamen, Hefei, Nanjing, Shijiazhuang, Wuxi, Tianjin, Hangzhou and Wuhan, ranked among the top in the 70 medium and large cities in terms of the month-to-month growth of housing prices, surpassing the four first-tier cities Beijing, Shanghai, Guangzhou and Shenzhen.
Xiamen and Hefei grew by 4 percent, Nanjing grew by 3.6 percent and the others also grew by over 2 percent. In first-tier cities, Shenzhen recorded the highest growth of more than 2 percent month-to-month.
Popular second-tier cites experienced sharp increase year on year. Data from the NBS shows that in July, prices of new homes in Xiamen raised 40 percent year on year, and Nanjing and Hefei increased by 34.9 percent and 34 percent year on year respectively.
Rapid increase of home prices in second-tier cities has overwhelmed relevant regulators. Last week, Hefei, Nanjing and Suzhou tightened the real estate policy. The primary means was increasing the percentage of down-payment of housing loans. It should be noted that the three cities all witnessed substantial growth of housing price and land auction price in the first half year.
Except the above three cities, other second-tier cities such as Xiamen, Tianjin, Hangzhou, Wuhan, Fuzhou and Zhengzhou also ranked among the top in terms of month-to-month growth of home prices over the past few months. In third-tier cities, Dongguan and Foshan were highlights.
“In the near future, such cities are also likely to introduce tightening measures to restrict the real estate market,” Xia Dan, senior researcher from the financial research center of the Bank of Communications, said in an interview with the Shanghai Securities News.
Xia believes that the most direct way of tightening policy is de-leverage through credit policy, including raising the percentage of down-payment, increasing the interest rate of loans and reducing the limit of personal mortgage loan and development loan, to prevent excessive capital from flowing into the housing market. In addition, measures to curb the extremely high prices during land auctions will also be introduced, such as prescribing the time of commence and completion of construction of transferred land, changing the payment method of land premium, strengthening regulation of the land market and cracking down land hoarding, adjusting the structure of land supply, restricting the land auction price and etc.
Translated by Adam Zhang
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