April 18, 2016 / 2:26 AM / 3 years ago

China March home prices rise at fastest rate in two years, top cities boom

HONG KONG (Reuters) - China’s home prices in March gained at the fastest pace in almost two years but that growth may slow as local authorities tighten home purchase requirements in the two top performing cities on fears of a bubble forming.

High rise residential flats are under construction in the southern city of Shenzhen neighboring Hong Kong, China September 11, 2015. REUTERS/Bobby Yip

The southern city of Shenzhen continued to be the top performer, with home prices surging 61.6 percent from a year ago, followed by Shanghai with a 25 percent gain.

Prices in the two cities were up 3.7 percent and 3.6 percent respectively from a month earlier.

Average new home prices in 70 major cities rose 4.9 percent last month from a year ago, picking up from February’s 3.6 percent rise, according to Reuters calculations based on data released by the National Statistics Bureau (NBS) on Monday.

March prices were up 1.1 percent compared to a month ago.

China’s housing market bottomed out in the second half of 2015 on a series of government support measures, but a strong rebound in prices in the biggest cities has sparked concerns that some markets may be overheating, driving Shanghai and Shenzhen’s authorities to tighten downpayment requirements for second homes and raising the eligibility bar for non-residents.

While home sales in the two cities plunged as much as 52 percent after the tightening, prices eased only by single digit, according to data from China Real Estate Index System (CREIS).

April’s official data, which will reflect the impact of the tightening measures, is due to be released in mid-May.

Area of property sold in the first quarter grew 33.1 percent to a near three-year high, according to data from the National Bureau of Statistics (NBS) on Friday.

While property in China’s top-tier cities is booming, prices in smaller centers, where most of China’s urban population lives, are still sinking and complicating government efforts to spread wealth more evenly and arrest slowing economic growth.

“(Monthly) price rises among cities still showed big differences. Cities with big rises were concentrated in the first-tier and, in part, the hot tier-two cities. Their growth is much faster than other cities, with the rest of the second-tier and third-tier cities relatively stable,” Liu Jianwei, a senior statistician at the NBS, said in a statement accompanying the data.

The NBS data showed 40 of 70 major cities tracked by the NBS saw year-on-year price gains, up from 32 in February.

Reporting by Clare Jim; Editing by Eric Meijer

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