| HONG KONG/SHANGHAI
HONG KONG/SHANGHAI Frenzied property buying in Shanghai has set alarm bells ringing that a new bubble is forming, just months after China's frothy stock markets crashed, raising fears about a replay of the real estate bust that has hit the country's growth since 2012.
Home prices in the city, China's biggest financial hub, climbed 3.6 percent in February from the previous month, according to a survey by CRIC, extending the 17.5 percent annual gain it recorded in January, which was seven times faster than the country as a whole.
The property revival has coincided with investors' abrupt loss of faith in China's share markets, which had soared 150 percent in the year to mid-2015, only to give up fourth fifths of those gains since the summer.
"The (property) market seems crazy again. I have no idea why it's crazy, but it should be the right time to buy," said Wang Zhongcai, a 50-year-old clerk, who was queuing, among many others, to register ownership of a small investment apartment he had bought.
From 2005 to 2011, property prices in China soared, buoyed by ready credit, migration into the cities, and government stimulus measures after the global financial crisis.
As developers poured money into new builds and unrelated companies set up property arms, residential housing development as a share of economic output tripled in a decade, until government measures to cool the market ended the frenzy.
Chastened by the impact of that bust, which left a huge stock of unsold apartments across China and hammered industries supplying construction materials, Beijing has for the last 18 months been trying to soften the blow, cutting interest rates, downpayment requirements and property transaction taxes.
The government's principal goal was not to help the bigger cities but the smaller ones where unfinished, abandoned developments remain a very visible reminder of the market failure.
But the big cities appear to be drawing the lion's share of new investment - and warnings from economists.
"In first-tier (cities) the prices are certainly rising too fast. Every time when there are control policies, most resources focus on first tier," said Lan Shen, Standard Chartered's China economist in Beijing.
"Going forward the policies will be more aiming at the lower tiers; very selective measures, not broad-based to create a bigger bubble in the first tier," Lan said.
But as China loosens the credit environment to support growth, which slipped to its weakest in 25 years in 2015, speculators are following the investment logic, not Beijing's goals.
"First-tier cities have a more sophisticated environment (for speculation). Investors see room for prices to rise because there's a lot of demand yet limited supply," said Clement Luk, chief executive officer for eastern China at realtor Centaline.
He added that Shenzhen, a booming major city in southwest China, was blazing the trail for Shanghai.
"People think since Shenzhen has gone up 50 to 60 percent last year while Shanghai was up only 20 percent, it should be now Shanghai's turn."
Hong Kong developer Shui On Land (0272.HK) said last month it sold out a new residential development in north-central Shanghai on the day of launch at an average price of about $1,140 per square foot.
The largest unit was an 1,800 sq ft apartment that fetched more than $2.2 million, and the agent said prices would "definitely go up" when they start selling a new phase of the development in May.
Wang Wenwen at real estate agency Sinyi said sellers could see the market heating up and were now playing catch-up with each other in raising prices.
An official at Shimao Property (0813.HK), which last October launched a project in a less central part of Shanghai averaging 41,000 yuan per meter, said the company was planning to raise prices for its new launches this month and next.
Shanghai is already trying to alleviate the pressure, issuing new rules last month to increase the supply of small and medium-sized apartments.
But the history of China's booms and busts and Beijing's efforts to cap the highs and cushion the lows has made some investors wary that what goes up too fast comes down as speedily.
"This rally is too crazy," said a property agent who gave his last name as Xu. "I own three units in Shanghai and I'm planning to sell them. I think a chill wind is blowing to the first-tier city, and I worry that the government will implement cooling measure soon."
(Editing by Will Waterman)