China Home Prices Continue to Rise, but Shenzhen’s Top Performance May Have Peaked – Reuters

BEIJING (Reuters) – Home prices continue to rise rapidly in most major Chinese cities, although signs suggest that they may have peaked in the southern city of Shenzhen, based on data reflecting July price trends.

According to research firm China Index Academy, prices for new homes in 100 cities increased by 12.39 percent in July compared to the same month last year, a faster rate than the previous month.

The average price of homes across these 100 cities reached 12,009 yuan ($1,807) per square meter in July, marking a 1.63 percent increase from June. This is an acceleration from the 1.32 percent rise observed in June.

In Shenzhen, where home prices have surged the most in the nation this year, prices initially peaked at 69,843 yuan ($10,509.03) per square meter in the first week of July, but then dropped by over 27 percent based on later transactions. Reports indicate that prices in Shenzhen fell 8.15 percent month-on-month in July, marking the steepest monthly decline since 2012, after reaching a record high in June.

Shenzhen is among several top-tier cities, including Shanghai, that have implemented tighter restrictions on home purchases in recent months to curb rapid price increases, which have raised concerns about potential asset bubbles.

While prices in Shenzhen may have peaked, other first-tier cities continue to experience robust year-on-year growth. In July, prices in Shenzhen, Shanghai, and Beijing saw increases of 41.25 percent, 22.5 percent, and 15.47 percent, respectively.

In contrast, smaller cities are experiencing declines, with 38 out of 100 cities reporting lower prices in July compared to the previous year.

Media reports in China have begun to highlight potential risks associated with the swift changes in the housing market this year, advocating for tailored real estate policies for different cities amid fears of speculative bubbles.

The property sector remains a crucial component of the world’s second-largest economy, and a strong recovery in home prices and sales has contributed to better-than-expected economic activity in the first half of the year. However, analysts warn that if prices stagnate or begin to decline, particularly in light of persistent overbuilding in many smaller cities, it could adversely impact the market’s activity.

The China statistics bureau is scheduled to release official housing price data on August 18.