Savills: Residential price growth continues to slow as the government pivots towards the leasing market

23 October 2017

“The latest figures point to a sustained slowdown in the residential price growth as a result of weaker transaction activity in response to property controls and a tightening of the credit markets.” -- James Macdonald, Head of China Research.


In September 2017, 44 of the 70 tracked cities recorded month-on-month (MoM) increases in first-hand commodity residential prices, compared with 46 cities in August. Eight cities recorded no change, while 18 recorded price decreases. 38 cities recorded slowing growth rates, compared to 53 in August.

The five cities with the largest increases were: Anqing (0.9%), Jining (0.8%), Nanchong (0.8%), Changchun (0.8%) and Harbin (0.8%).

The five cities with the largest decreases were: Quanzhou (-0.8%), Jinan (-0.6%), Guangzhou (-0.5%), Fuzhou (-0.4%) and Qinhuangdao (-0.4%).

On average, the 70 cities prices increased by 0.19% in September, the twenty-ninth consecutive MoM increase for the 70 city index. Average prices are currently up 6.53% year-on-year (YoY), and up 24.29% compared with December 2010 when the index was first established.

In the second-hand market, prices continued to rise in September increasing by 0.21% MoM, up 5.69% YoY and up a total of 15.23% compared to the end of 2010.

First tier city analysis

First tier cities saw first-hand prices fall by 0.20% in September, the second consecutive month of declines. While having price declines moderated somewhat in Guangzhou, the city still led the first tier cities declines, falling 0.5% in September.

In contrast to the first-hand market, Guangzhou recorded a 0.2% increase in second-hand prices. While second-hand markets recorded a decline of 0.33% in August, price declines abated in the remaining first tier cities, resulting in price decline moderating to 0.15% in September.

First tier cities continue to have some of the lowest levels of unsold inventory, the most vibrant economies and job markets, as well as some of the strongest housing demand. Despite this, increasing unaffordability and much stricter lending criteria and purchasing restrictions as well as other cooling policies have tempered short-term demand which has resulted in the recent price declines.

City tier analysis

All city tiers, with the exception of first tier cities, recorded price growth in September. Fourth tier cities recorded the strongest growth despite also recording a more rapid decline in price growth rates. Second tier cities recorded a slight acceleration in price growth rates.

The second-hand market in contrast saw second tier cities record a significant deceleration in the pace of growth from 0.36% in August to 0.15% in September. Looked at as a whole the 70 cities recorded similar growth rates of 0.21% (second hand) and 0.19% (first hand) having decelerated 7 bps and 5 bps respectively.

First and second tier cities

The three best performing second-tier cities in the first-hand market in September were Shenyang (0.7%), Dalian (0.6%), and Xi'an (0.5%). These were all cities that had previously found it difficult to keep pace with the price growth recorded by second tier cities in the east and south China, but have since benefitted from policy support and lighter restrictions.

Nine second tier cities recorded an improvement in terms of growth rates in September while six recorded a decline in growth rates or an acceleration in price declines.


After a rapid deceleration in price growth rates in August, first and second tier cities seem to have stabilised in September while the pace of growth in lower tier cities have continued their gradual decline.

The government policy towards the housing market has shifted quite significantly in the last year with the government holding firm on its commitment to control residential price growth, relying more heavily on the services sector and state-directed, fixed-asset investment to support economic growth and job creation. A Ministry of Housing and Urban-Rural Development (MOHURD) minister was recently quoted as saying that the government would not loosen property policy controls and that it would provide adequate housing and develop the leasing system to provide a long-term solution to the property market.

The government has been actively supporting the growth of the multifamily market via the release of lease-only residential land plots in leading cities where house prices are becoming unaffordable for the younger generations as well as other policies to better regulate and increase transparency. Developers, aligning themselves with the government objectives and continuing to increase holdings of income producing assets as well as generate more revenue from management fees, have started to enter the market en masse.


Key Contacts

Olivia Shao

Olivia Shao

Marketing & Communications, China


+86 21 6391 6688 Ext.8893