Shenzhen new home prices surge 66pc in August as sales volumes slow

Shenzhen led new home price increases last month but it also suffered the steepest sales decline among all 10 major cities tracked by the SCMP-Creda index, implying the momentum will not last.

Prices soared 65.5 per cent in the city bordering Hong Kong in August from a year earlier to 38,050 yuan (HK$46,258) per square metre, keeping its No1 spot as the country's most expensive city for a second consecutive month, after overtaking Shanghai in July.

"The housing market continued a cooling trend in August, as developers held new launches until September," said Chen Sheng, the dean of China Real Estate Data Academy, which partners the South China Morning Post in the monthly index.

Although September and October are traditional busy seasons, some analysts are concerned expectations may be running too high as home prices in the mainland's first-tier cities, particularly Shenzhen, have already surged more than expected so far.

For example, the SCMP-Creda index showed new home prices in Shenzhen rose 44.3 per cent in the first eight months, including a 12.9 per cent month-on-month jump in August.

The index showed prices in Shanghai gained 10.5 per cent in the first seven months, before losing 9.3 per cent in August.

Guangzhou and Beijing saw an increase in new home prices of 7.3 per cent and 5.5 per cent respectively in the first eight months.

Chen warned: "Home prices in first-tier cities are rising too fast, possibly exhausting future potential."

The combined new home sales in the 10 major cities covered by the SCMP-Creda index fell for the second consecutive month in August, to register a volume 12 per cent lower than this year's June peak.

Coincidentally, the country's stock market began to tumble from mid-June, wiping US$5 trillion in value off listed firms. The sudden wealth evaporation has hit the performance of the high-end housing market.

In August alone, new home transactions slid 26.6 per cent in Shenzhen to 597,000 square metres, the lowest among all 10 cities. Shanghai, Beijing, Guangzhou, Chongqing, Nanjing and Hangzhou all suffered a fall to varying degrees. But the southwestern cities of Chengdu and Wuhan bucked the trend, with a solid monthly gain of 19.6 per cent and 10.2 per cent respectively. Tianjin also enjoyed a 5.3 per cent increase.

To stimulate housing demand, the central bank cut interest rates five times since November, with the latest one in late August. The country's benchmark mortgage rates are at record-low levels. On top of that, some local governments have made subsidised local provident funds easier to access by homebuyers for larger loans.