Vacancies and economy-cooling measures prevent values rising anywhere near as fast as those in booming Shanghai While Shanghai home prices keep surging despite a nationwide credit-tightening policy, Beijing has experienced only modest price growth. Market watchers have attributed the difference to sufficient supply in the capital and active investment activity in Shanghai. According to official figures, Beijing home prices rose only 3.5 per cent in the first nine months of this year compared to the same period of last year. Although mainland real estate agents point to some luxury projects in core areas that have risen about 20 per cent in a year, home price growth in the capital is still much slower than that in Shanghai, which reported more than 20 per cent growth in the first nine months. Although the demand for housing has been increasing in Beijing, with total residential sales rising 27.3 per cent in the first nine months according to official figures, average home prices in the city have been almost static. The main reason behind this lack of strong price growth is sufficient supply, even in core areas, according to property consultant DTZ Debenham Tie Leung. Phillip Wu, a director of the company in Beijing, said inventory would be sufficient for the coming two to three years. 'For 11 major luxury residential projects in core areas, about 70 per cent were sold in the past two years, [so] flat-seekers still face quite a lot of choices. Beijing has just seen significant growth in demand, while demand in Shanghai has been surging for four years.' Official figures show total vacancies in the Beijing property market, including both residential and commercial space, now stand at 8.7 million square metres, down 2.53 million square metres from the beginning of the year. Conversely, new residential supply in Shanghai has been shrinking. According to Shanghai Real Estate Trading Centre, the total residential area approved for pre-sale fell 16.7 per cent in the first half of the year to 8.74 million square metres, compared to the same period of last year. In addition, many Shanghai developers have delayed launching their projects in view of gloomy market conditions caused by the credit-tightening policy. According to the property consultant, developers in Shanghai released for sale about 3.16 million square metres of high-end residential projects in the third quarter of this year, down from 4.42 million square metres in the same period of last year. General manager of Centaline (China) Property, Phinex Wong, said Shanghai home price rises were mainly driven by local investment activity. 'The price growth will not be this strong if the market is dominated by end-users,' said Mr Wong. He added that the luxury residential sector - with units selling for more than $15,000 per square metre - was less affected by tightening mortgage lending from mainland banks.