Growth in home prices in China’s bigger cities may push up costs countrywide, think tank says

Growth in home prices in China’s bigger cities is expected to outperform the national average in 2019, the Chinese Academy of Social Sciences, a top government think tank, said in report released on Thursday.

A relatively short supply of new homes will exert an upwards pressure on national home prices, which the think tank said could add 7.6 per cent to 9,206 yuan (US$1,350) per square metre. However, sales by floor space could decline 0.84 per cent, from a historical high in 2018, according to the report.

“The marginal easing of previously tight curbs, and local governments’ support for first-home and public housing demand, will buoy up transactions,” said Wang Yeqiang, a researcher at the think tank and one of the report’s authors. “The government should closely monitor these cities to avoid overheating.”

New home prices rose in 67 out of the 70 cities monitored by China’s National Bureau of Statistics in April. First-tier cities saw their month-on-month increase widen to 0.6 per cent from 0.2 per cent in March, while growth in second-tier cities ticked up from 0.6 to 0.8 per cent.

This prompted the housing ministry to warn the four cities of Suzhou, Foshan, Dalian and Nanning, that they were showing signs of overheating. Suzhou has imposed harsher rules on land bidding and several banks in Nanjing, a city nearby, raised its mortgage rates. China’s banking regulator has also warned banks against channelling funds into real estate through the shadow-banking sector.