Cities all over China has witnessed a slowdown in home price growth for about eight consecutive months. A few metropolises saw average home prices decline in May. It is believed that this happened as an increasing number of cities introduced a series of tougher measures against the speculative activity.
When it came to pre-owned home prices, the capital city of Beijing decreased the maximum, at about 0.9 percent month on month. The capital was closely followed by Sanya. The Hainai province located coastal city saw a decline of 0.5 percent month on month.
Tough crackdown on speculation
As per data extracted from housing authorities in Beijing, about 10,000 pre-owned residences were sold and bought during May. This figure is lowest in 2015 and 2016. According to Ma Xiao of Shanghai Ruifeng Property Limited, tougher lending requirements are a good reason for speculators shifting away from residential property market. The real estate agent pointed out that second homes buying in Shanghai became almost non-existent in Shanghai.
As per Liu Jianwei of National Bureau of Statistics (NBS), median growth of new home prices in the first-tier cities went down 2.2 percent month on month. The median growth of pre-owned homes in the first-tier cities went down by 1.7 percent. The National Bureau of Statistics is tasked with monitoring prices of homes in about 70 Chinese cities. Jianwei works as a statistician in the NBS.
Various price inhibiting factors
When it comes to second tier cities in China, the price growth of new homes went down 0.8 percent. The price growth of pre-owned homes dipped 0.5 percent. Analysts are not surprised. According to industry professionals, declines in home prices are common in cities which enjoyed quick growth in prices during the last few years. This can be attributed to increasing lending costs, lower yields from property rentals and tougher home buying regulations. All these factors drive away hot money from residential market in cities.
Although recent measures to curb speculative property investments can be considered successful, there are a few unintended side effects. The demand is now moving to smaller cities. These urban areas now witness a price surge in both land and homes. In smaller cities like Jiaxing, about an hour's drive distant from Shanghai, residence prices went up quickly as a result of flight of capital from bigger cities. The median price of pre-owned residences in downtown Jiaxing went up from 5,000 yuan per square meter in June 2015 to a whopping 12,000 yuan per square meter at present.