Hongkonger Lucy Wong has run her own property investment firm in Shanghai for the past 11 years and speaks with awe about the yawning gap she has seen opening up over this period between home prices in the major cities and in the provinces. Two years ago, she said, she paid 500,000 yuan (HK$630,000) or 4,500 yuan per square metre for a 120 square metre flat in downtown Fuzhou, a fourth-tier city in Jiangxi province. At the time, average prices in downtown Shanghai were more than six times higher, at about 30,000 yuan per square metre. The Fuzhou flats' value has since risen by 20 per cent to about 600,000 yuan, or about 5,000 yuan per square metre, offering her a handsome return on her investment. But over the same period prices in downtown Shanghai surged to more than 60,000 yuan per square metre, with top-priced apartments fetching as much as 200,000 yuan per square metre. "Shanghai prices just seem to keep going up on any new development and still there are buyers," Wong said. "Sellers raised their asking prices by 5 to 10 per cent just on the news that a free- trade zone would be set up in the city." The sharp rise in Shanghai prices was driven by the rapid economic development in the city, said David Hong, head of research for data provider China Real Estate Information. That skewed pace of economic expansion also explained the polarisation between home prices in first- and lower-tier mainland cities, he added. "Developers were overly aggressive in buying land sites in big and small cities two to three years ago in an anticipation of a property boom in real estate markets nationwide," Hong said. Those projects were now coming onto the market, resulting in a glut of new-home supply at a time when the economy was slowing. "How can city governments draw people to their cities if their economies are not good?" Hong asked. "The result is that the take-up rates in their cities is not meeting new supply." According to the National Bureau of Statistics, new home prices in major cities rose at a rapid pace in July, with Guangzhou posting the biggest gain, of 17 per cent. Prices in Beijing and Shanghai were up by 14 per cent. Despite the continued rapid rise in prices, the government is not expected to introduce further curbs aimed at cooling down the market. Among the 70 cities examined in the National Bureau of Statistics survey, Wenzhou in the east of the country was the only one where prices of new homes fell in July , down 2.4 per cent on the previous year. Other small cities such as Anqing in Anhui province and Jiujiang in Jiangxi province posted declines in prices month on month. Some smaller cities have already begun easing some of the policy restraints on their property markets that their city governments introduced under the direction of Beijing. Wenzhou is reported by mainland newspapers to be "fine-tuning" its home-purchase restrictions by allowing second-home purchases by qualified local residents, and Yancheng, in Jiangsu province, has suspended limits it had placed on housing price rises. China Real Estate Information Corp released a report last month which said the property markets in some cities in the northwest, such as Longnan, Wuwei, Jiuquan and Dingxi in Gansu province. and Ordos in the Inner Mongolian autonomous region, were at risk of overinvesting. The report measured the property investment outlook of cities by analysing a number of factors, including market demand and supply, market capacity, urbanisation rate, population density, and the city's size. It found that in Ordos - known as a "ghost city" because of its low occupancy rates - prices had fallen sharply to 3,000 yuan per square metre because of excessive speculation, while prices in Longnan were at risk of falling because of its location in the nation's poorest area and also because of a shortage of water. Guangyuan in Sichuan province was ranked as the 18th most risky city for property development. "It has been reported that people in Ordos own up to eight flats. How many more can they buy?" asked Alan Chiang Sheung-lai, head of residential at DTZ Greater China. Meanwhile, demand in first-tiers cities remained strong in view of their economic development, and the supply pipeline in the major cities was not as large as it was in smaller cities, he added. "Since the central government is not expected to announce any further tough measures, buying demand in major cities has returned, fuelling price rises," Chiang said. The latest measures introduced to cool the market came in March, with the nation's capital city issuing tough measures that raised the minimum down payment on second homes to 60 per cent and enforced a 20 per cent capital gains tax on existing homes. "Home prices in major cities such as Guangzhou, Shanghai and Beijing have so far risen by 15 to 20 per cent from the beginning of the year," Chiang said.