May 16, 2018 / 1:48 AM / 2 months ago

China's home prices pick up as buyers look to smaller cities

BEIJING (Reuters) - China’s new home prices rose in April with an increasing number of smaller cities driving broader growth, helped by state measures that allowed buyers to get around existing restrictions and economic development prospects in those centers.

FILE PHOTO: Residential apartments are located in downtown Shenzhen, China April 26, 2017. Picture taken April 26, 2017. REUTERS/Bobby Yip/File Photo

New home prices in China’s 70 major cities rose 0.5 percent in April from the previous month, up from a 0.4 percent rise in March, Reuters calculated from National Bureau of Statistics (NBS) data published on Wednesday.

On an annual basis, home prices increased 4.7 percent in April, slowing from a 4.9 percent gain in March.

Fifty-eight cities of the total 70 cities surveyed by the NBS reported higher prices in April, up from 55 cities in March, suggesting broader market strength despite persistent curbs to contain the still hot market.

The data signals an increasing differentiation between urban property markets across the country, analysts say, with China’s city-based policy fine-tuning has allowed some easing of restrictions in smaller centers.

“This perfectly illustrates the kind of mentality still prevalent in Chinese property market,” said Yan Yuejin, research director at Shanghai-based E-house China R&D Institute. “Many buyers are looking to buy in cities that are still cheap, with lax policies and have come up with some kind of development concept, especially as opportunities are limited now in bigger cities.”

New policies that allow college graduates to bypass purchase restrictions in provincial capitals have stoked investment, said Zhang Dawei, an analyst with Hong Kong-based Centaline, a real estate research consultancy. [nL4N1PH1P3]

Price growth in China’s second tier cities, which include most of the larger provincial capitals, and smaller third tier cities accelerated 0.1 percentage points and 0.2 percentage points, respectively, in April, the statistics bureau said. It did not give the actual rates of growth.

Analysts also point to political and economic developments that have drawn new investors into markets away from the bigger centers.

The Chinese city of Dandong, which lies on the border with North Korea, became the top price performer in April, rising a robust 2 percent, NBS data showed.

Investors rushed into the city’s property market after the historic inter-Korea summit last month opened the prospect of rapid improvement in relations between North Korea and the rest of the world.[nL3N1S94DV]

China has also flagged the development of an international free trade zone and port on the southern island of Hainan, amid speculation it is trying to set up a rival to the trading and financial hub of Hong Kong. [nL3N1RQ4NF]

Hainan cities Sanya and Haikou both rose 1.9 percent in April.

China’s house price growth started to cool more notably in the second half of last year as the government sought to deal with property bubbles, following a two-year expansion in the sector.

Authorities have introduced curbs in more than 100 cities since 2016, in a push to reduce bubble risks while ensuring a soft landing as real estate remains a crucial driver of the economy.

With signs that rapid housing growth in top tier cities is cooling, regulators have this year turned their attention to smaller cities where there have been no purchase restrictions.

The Chinese southern provincial capital Guiyang issued restrictions this week banning newly-built houses from being resold within three years.[nL3N1SM07L]

Despite signs of market resilience, data showed on Tuesday China’s property investment growth slowed in April as higher borrowing costs and increased curbs on buyers weighed on demand. [nL3N1SF3M4]

Some analysts expect more curbs and that price appreciation will moderate as a result.

“The policy environment is still very against speculation and does not support sharp price gains in the short-term,” said Tin Sun, head of research at the North China office of CBRE, a property consultancy.

“Most of the third tier and fourth tier cities are still suffering from population outflows so I doubt the overall demand would support sustainable gains in the longer term.”

(For graphic on cooling China's property market, click: tmsnrt.rs/2rL5vat)

Additional reporting by Min Zhang; Editing by Sam Holmes

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