China's home prices rose at their fastest clip in almost two years in February thanks to red-hot demand in big cities, but risks of overheating in some places combined with weak growth in smaller cities threaten to put more stress on an already slowing economy.
Average new home prices in 70 major cities climbed 3.6 percent in February from a year ago, quickening from January's 2.5 percent rise, according to Reuters calculations based on data released by the National Statistics Bureau (NBS) on Friday. That was the quickest year-on-year increase since June 2014.
The NBS data showed 32 of 70 major cities tracked by the NBS saw year-on-year price gains, up from 25 in January. Tier 1 cities, including Shenzhen, Shanghai and Beijing, remained the top performers, with prices surging 56.9 percent, 20.6 percent and 12.9 percent respectively. A slew of government measures and increased lending helped boost the housing market in the biggest cities, but signs that some places may be overheating even as prices remain depressed in smaller cities complicate matters for policymakers. China's housing market is a crucial engine of growth, accounting for 15 percent of gross domestic product. With the broader economy decelerating amid weak exports, factory overcapacity, slowing investment and high debt levels, authorities are hoping the property market will help stabilise growth. But a breakdown of NBS data points to persistent softness in property markets in smaller cities where a glut of unsold houses have weighed on prices. Most third-tier cities still saw on-year prices drops in February, though the declines eased from the previous month, the NBS data showed.
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