Chinese Cities Report Spike in New Home Prices

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Residential property prices jumped dramatically in major Chinese cities in August, a move that could lead to further government intervention to prevent a housing bubble. 

New home prices increased in August in 69 of 70 Chinese cities, compared to last year, according to new data from the National Bureau of Statistics. Compared to the previous month, new home prices increased in 66 of the 70 Chinese cities followed by the group.

Among the largest increases were in the major cities of Beijing and Shanghai, each increasing 15 percent from last year. In the city of Shenzhen new home prices increased 18 percent from the previous year.

But there was disparity between the performance in top tier cities and smaller cities. Annual increases ranged from 7 to 10 percent in second-tier cities and were closer to 6 percent in third-tier cities, the report notes.   

Overall home prices in China increased an average of 7.5 percent from last year, recording the fastest pace since December 2010, according to media reports.

Housing prices in China have surged in recent years, prompting the government to roll out various measures aimed at cooling the market. However, policymakers have retreated from implementing new measures as they concentrate on the country's economic growth.

"The government seems to have tolerated rising property prices and has not rolled out new tightening measures, which ... may partly reflect the challenge it faces in achieving a 7.5 percent growth target," Zhiwei Zhang, an economist at Nomura, told CNN.

With no new recent measures, developers and investors have a renewed sense of confidence in the market, analysts say. 

The "continued effort to paint a picture of still-benign housing price conditions may imply that the central government wants to deal with other issues first before making a very clear stand on the overall housing policies," Du Jinsong, an analyst with Credit Suisse, told the Financial Times. 

Previous government measures included restrictions on the number of homes residents could buy and an increase in minimum down payments for second homes.  

Some believe the recent surge in new home prices could force the government to take further action. 

"The central government has sent inspection teams to visit various cities to ensure the enforcement of the home purchase restriction programs, and some banks are hiking mortgage rates by eliminating discounts for first home buyers," Na Liu of CNC Asset Management told the FT.