As the mainland's second-tier cities continue to flourish on the back of the country's red-hot economy, more people are looking west for opportunities, and Chongqing is among the prime targets. With a population of 31million, China's fourth self-governed municipality (after Beijing, Shanghai and Tianjin) has traditionally lagged the country's largest cities in housing prices, but this is slowly changing. Rapid growth in Chongqing's real estate sector means more out-of-town investors are flocking to the economic locomotive of China's western region in search of bargains. According to the Chongqing Land Resource and Housing Administration Bureau, last year the average house price in the city increased 4.25 per cent from a year earlier, to a median of 2,697 yuan a square metre. Chongqing's residential prices are only about 30 per cent of those in Shanghai and about 10 per cent of Hong Kong's. At a government economic conference late last year, researchers forecast that housing prices would continue to rise on a projected gross domestic product growth of 11 per cent through 2007. Based on the average housing price of 1,800 yuan a square metre five years ago, the 50 per cent rise in property prices was in line with the average monthly salary of Chongqing workers, which rose from 1,700 yuan to 2,700 yuan during that period. Xavier Wong, director and head of research for Knight Frank Hong Kong, says Chongqing has reason to be happy about its healthy and reasonably priced property sector. He cites an expected 4 to 5 per cent appreciation of the yuan over the next 12 months and relatively higher rental yields than in Hong Kong as reasons to invest in mainland property. 'In being designated as a core city by the central government under the Western Development Strategy, Chongqing plays an important role as an economic hub in western and central China,' Mr Wong says. 'The policy factor means that Chongqing will grow fast with enormous capital investment financed by the central government. 'Foreign investment in Chongqing has also been increasing dramatically in the past two years. 'Chongqing's foreign investment inflows rose by 32 per cent last year after rising by 105 per cent in 2005. China's overall foreign direct investment declined by 4.1 per cent in 2006.' Mr Wong says even if residents have only a fraction of the purchasing power, Chongqing may still be a lucrative market. He cites Yu-zhong, Dadukou and Jiulongpo as the most prosperous districts in the city's urban area. 'The average income level of these three districts is comparable to their counterparts in some coastal cities such as Jiangmen and Huizhou. The combined population of these three districts was around 2 million at the end of last year,' he says. While Chongqing real estate investment topped 60billion yuan in 2006, up 20 per cent year on year, most of the city's new housing is still in the lower tier and middle range to support average wage earners. However, with the municipality keeping tight controls on land supply for luxury housing (the Chongqing Morning Post reports that only 200 villas will hit the market this year) what is available has appreciated rapidly. The first phase of the villas at Chongqing Poly International Golf Garden, created by the state-owned China Poly Group in Yubei district, came on the market at 8,500 yuan a square metre in 2005. They have since soared to 11,500 a square metre, a rise of 35 per cent. At Fortune Golf Villa, home to the Chongqing International Golf Club, the first phase of the villa project features 27 units in various styles, ranging from 432 to 728 square metres. Eighteen of the units are for sale, and the average square metre price is 13,500 yuan. A 432-square-metre North American-style villa went for 4million yuan, while the largest villa, a 728-square metre Victorian-style unit, fetched 10 million yuan. The second phase features 48 villas and the third, 93. The project is 20 minutes from the central business district and a villa purchase includes a family membership at the 18-hole golf course. Closer to the city, Tianjiang Dingcheng is offering apartments starting at 3,500 yuan a square metre. The apartment complex, which is connected to a 6,000 square metre shopping mall, is built around a garden with 60 per cent green space in Jiefangbei, one of the city's earliest development centres. It is also near the Northern New Downtown, one of five downtown areas in Chongqing. In Yu Zhong district, Jiahua Xincheng is selling apartments ranging from 62 to 107 square metres. The two-bedroom to four-bedroom units start at 3,700 yuan per square metre in a complex with 38 per cent green space. Mr Wong says residential markets in second-tier cities are generally less speculative than those in first-tier cities. With Chongqing prices at about 10 per cent of Hong Kong levels, the value of residential properties in second-tier cities 'may have greater room for appreciation', he says.