New Home Sales Drop in China First-tier CitiesAfter falling for four straight months, total sold residential floor space picked up marginally by 5 percent m-o-m in May to 83 million square meters. But in first-tier cities, home sales figure finished the month 17% lower than the previous month, to only 3.7 million square meters. Beijing saw the steepest decline among its peers, with the total transacted residential floor space in May plunged by 36% m-o-m. Shanghai and Guangzhou recorded respective monthly declines of 27% and 11%, while Shenzhen rose 89% m-o-m.

New home prices rose on a monthly basis in 65 major cities in May, down from 67 cities in April. According to our calculation based on National Bureau of Statistics data, the prices of new homes in 70 major cities averaged a 0.9% m-o-m increment in May, slightly less than an one percent gains in the previous month. However compared with a year ago, the growth rate gathered pace to reach 6%, the highest level this year.

Thanks to tougher measures, new home prices in first-tier cites defied the market in May. New home prices in Beijing recorded a decrease of 1.3% m-o-m during the month, while Shanghai and Guangzhou dropped 1.4% and 1.5% respectively. Shenzhen, on the other hand, saw new home price rose 1.9% compared with a month ago. Although new home prices continue to slow down in first-tier cities, they are still well above the targets. New home prices in Guangzhou rose 15.5% compared with a year ago, while Beijing, Shenzhen and Shanghai rose 15.2%, 14% and 12.2% respectively.

The resilient home prices highlight the difficulties of curbing the red-hot property market. Given a lack of investment options for domestic investors, buoyant land prices (especially for luxury land plots in first-tier cities), loose liquidity conditions and strong demand for residential properties, many experts expect the upward pressure on home prices to persist this year. A poll compiled by Reuters predicted a 8% growth in China’s home prices this year.