New home prices in 100 major Chinese cities climbed 2.71 percent in August and have increased 13.75 percent during the past year. More cities have hiked down payment requirements and put other buying restrictions in place to curb soaring prices with Shanghai expected raise down payments to the highest level in the nation.
Research from the China Real Estate Index noted that new home prices in 68 of the top 100 cities rose with the average price per square metre coming in at RMB 12,270 ($1,838) across the country.
Shenzhen, Shanghai and Beijing all saw new home price increases last month, but some of the largest price hikes took place in some of China’s second and third tier cities where purchase restrictions have yet to suppress demand.
Second and Third Tier Cities in Full Rebound
Wuxi in Jiangsu province recorded the largest increase in new home prices with a 6.8 percent surge in August, compared to the previous month. The industrial center two hours drive west of Shanghai, has seen new home prices grow 19 percent this year.
In Nanjing, home prices grew by 3.41 percent last month even after the local government raised down payments to fifty percent mid-month. August marked the fifth time in the past sixth months that prices jumped by at least three percent in the capital of Jiangsu province, and prices have now risen by 32.67 percent when compared to last year.
Dongguan in Guangdong province, Fuzhou in Fujian and Tianjin were other second tier cities that saw new home prices climb by more than three percent in August. In Dongguan, next to Shenzhen, the cost of a new home has jumped by more than 40 percent during the past year while the price increase in Fuzhou helped end a two-year slump that saw prices drop by nearly 24 percent between April 2014 and February 2016.
Shanghai, Shenzhen and Beijing Climb Despite Restrictions
Shenzhen remains China’s most expensive market with new home prices now averaging RMB 54,478 ($8,164) per square meter after a 2.05 percent increase in August. New home prices in the city have now increased for 24 months straight.
A late surge of buyers fearing an increase in down payments in Shanghai last week helped spur a 3.87 percent increase in new home prices. This was the biggest increase since March when cooling measures were rolled out.
New home prices in Beijing remain the third highest in China, where increases have trailed behind both Shanghai and Shenzhen during the past 12 months.
Government Expected to Clamp Down on Frothy Market
Reports of cooling measures prompted buyers in Shanghai to purchase new homes in droves setting a five-month high for weekly transactions. Late last week Bloomberg reported that the government was looking to implement new curbing measures including increasing down payments.
Cooling measures are set to take effect in Xiamen next week where home price gains were some of the highest in China in May, June and July. The restrictions will limit residents to owning two homes while non-residents will only be allowed to purchase one home.