Home prices rose in more Chinese cities during March than in February on the back of improved market sentiment, government data showed. However, the price rises were mostly in the bigger cities and would not extend to the smaller cities, as the market divergence continued, said analysts. New home prices rose in 62 of the 70 cities tracked by the National Bureau of Statistics last month, up from 47 in February. Prices fell in eight cities, the bureau said on Monday. Shenzhen continued to see the fastest growth, with home prices jumping 61.6 per cent year-on-year. It was followed by Shanghai, where prices rose 25 per cent. On a monthly basis, prices rose 3.7 per cent in Shenzhen and 3.6 per cent in Shanghai. Xiamen, a southern port city, was the top performer on a monthly basis. Prices there gained 5.3 per cent from February. In a year they gained 15.7 per cent. Senior Statistician Liu Jianwei said the price-growth gap has widened among cities. “Prices are rising much faster in first-tier and some hot second-tier cities than in other cities,” he said. A slew of government supporting measures have led to better sentiment and a rebound in property sales since the second half of last year, but mainly in China’s biggest cities, which is opposite to the government’s goal to cut an oversupply of homes in smaller cities. In March, the central government requested city authorities to adjust housing policies to fit local conditions instead of adopting nationwide easing. Demand was spurred in Shenzhen and Shanghai last month by expectations that tightening of home buying restrictions was imminent as prices rose too quickly in the cities. In March the two cities introduced policies that included raising down payment requirements and extending the length of time someone has to work in the city before buying property. Transactions have sharply declined in Shenzhen and Shanghai in recent weeks. Meanwhile, in cities such as Haikou, Shenyang and Ningbo, where sales have been week due to oversupply, subsidies have been introduced to encourage home purchases. “Prices will continue to recover in bigger cities,” said Jinsong Du, head of Asia property research at Credit Suisse. “With credit easing and the stock market crash, money has scrambled to real estate.” He added that growth in some second-tier cities where governments haven’t tightened buying controls, would outpace first- tier cities, while there remains little hope for smaller cities as the Chinese economy is weak and the housing inventory is too large. “Consumers have become more selective and they believe properties in first- and second- tier cities can maintain their value,” Du said. Investment bank UBS has raised its expectation of China’s overall property sales growth to 5 to 7 per cent for this year and upgraded its property construction outlook after official data showed residential property sales increased 36 per cent, new residential starts grew 15 per cent and property investment growth turned positive at 6.2 per cent year-on-year in the first quarter. “There is still scope to further ease property policy, via down payment requirement and mortgage rate cuts... to facilitate inventory digestion in lower tier cities,” Wang Tao, chief China economist at UBS wrote in a report on Friday. But she said additional easing was unlikely in the near term given the highly-publicised sharp rise of property prices in first- and some second-tier cities.