(Bloomberg) -- China’s homes prices rose at the fastest pace in 10 months led by gains in a border town with North Korea that were fueled by Kim Jong Un’s embrace of diplomacy, underscoring the challenge Chinese authorities face in taming property speculation.
New-home prices in Dandong, which sits across the Yalu River from North Korea and is the nexus of trade between the two countries, gained a record 2 percent in April from March, according to data from the National Bureau of Statistics on Wednesday. The Dandong price gain dwarfed the 0.57 percent average rise in the 70 cities tracked by the government, the report showed.
The price gains come despite the government’s two-year campaign to curb speculation as rising property prices leave home ownership out of reach of many Chinese. Cities have been quick to roll out new restrictions on any signs of resurgent buying and some are offering subsidies to try to expand the rental market. The effort has tamed price increases in major cities, though gains in places like Dandong and the vacation resort island of Hainan, show that speculators continue to shift their focus beyond urban centers.
“The acceleration of home price gains countered policy efforts to cool off the market and despite a sharp year-on-year drop in floor space sold,” said Dariusz Kowalczyk, senior emerging-market strategist at Credit Agricole SA. “This means policy makers will need to do more to cool off the market, and we expect more demand restrictions, higher mortgage rates and down payments.”
Dandong was followed by Hainan’s provincial capital Haikou and tourism destination Sanya, where prices surged 1.9 percent in both cities, which was the fastest pace for Sanya in more than year. The advances came even after Hainan implemented China’s first province-wide home-buying restrictions last month after President Xi Jinping unveiled measures to boost the economy of the island popularly known as “China’s Hawaii” which fueled speculator interest.
Dandong also moved to tame prices this week, by introducing a resale ban to curb speculative purchases. Six Chinese cities, including southern Foshan and central Chengdu, have stepped up property-related restrictions after the housing ministry reiterated the central government’s priority to stabilize property markets.
In smaller so-called third-tier cities, prices increased an average of 0.6 percent in April, the fastest rate in 10 months, according to Bloomberg calculations. Those gains were helped by the easing of some buying restrictions amid a government push to redevelop slums. In second-tier cities, mostly provincial capitals, the gains were the quickest in 13 months. Only the biggest first-tier hubs showed weaker increases under strict restrictions.
The faster pace of price gains contrasted with a government report on Tuesday showing that home sales grew at a weaker pace in April.
©2018 Bloomberg L.P.
With assistance from Emma Dong