Savills: Overall growth pace continues to slow

18 August 2017

“Price indices indicate that residential price growth moderated further in July in response to sustained policy pressure and tighter financing conditions and in particular an increase in mortgage rates available to first time buyers in key cities. If this trend persists, the likelihood of new highly restrictive policies should decrease though fine tuning of existing policies may continue.” said James Macdonald, Head of China Research


In July 2017, 56 of the 70 tracked cities recorded month-on-month (MoM) increases in first-hand commodity residential prices, compared with 60 cities in June. Five cities recorded no change, while nine recorded price decreases.

The five cities with the largest increases were: Beihai (1.5%), Shaoguan (1.3%), Jinhua (1.3%), Nanning (1.3%) and Guilin (1.2%).

The five cities with the largest decreases were: Anqing (-0.3%), Fuzhou (-0.2%), Tianjin (-0.2%), Shenzhen (-0.2%) and Quanzhou (-0.2%).

On average, the 70 cities prices increased by 0.49% in July, the twenty-seventh consecutive MoM increase for the 70 city index. Average prices are currently up 9.33% year-on-year (YoY), and up 23.83% compared with December 2010 when the index was first established.

First-tier city analysis

First-tier cities increased by 0.03% in prices in July compared to a 0.03% decline in June, as prices stabilised in Beijing and Shanghai. The only first tier city to record growth was Guangzhou, which recorded a 0.4% growth in prices MoM.

Guangzhou has now recorded 28 months of consecutive MoM increases, while Shenzhen has been hampered by ten consecutive months of no growth which has bought it YoY change close to zero, to just 0.5%, compared to Guangzhou’s at 16.9%.

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 as well as stricter lending criteria and purchasing restrictions have tempered short-term growth, allowing these markets to consolidate recent home price increases. The key exception to that is the Guangzhou market, which is one of the least expensive first tier markets, having recorded more moderate growth in previous years.

City tier analysis

All city tiers recorded price growth in July ranging from 0.03% to 0.76%, with fifth tier cities recording the strongest growth for the fourth consecutive quarter. All city tiers recorded deceleration of price growth with the exception of first tier cities which accelerated 5 bps after three consecutive months of slowing growth.

The four best performing second-tier cities in July were Xi'an (1.1%), Chongqing (0.9%), Dalian (0.9%), and Shenyang (0.8%).

Nine second-tier cities saw a pick up in price growth in July, compared with six cities in June. The second tier cities with the biggest improvement in growth rates were Changsha (0.7%, 0.5 ppts), Dalian (0.9%, 0.4 ppts), Wuxi (0.0%, 0.3 ppts).

Regional analysis

All regions recorded steady growth in July, ranging from 0.34% to 0.74% month-on-month, however only the southern region recorded an acceleration in growth. Growth rates in the south were supported by a number of lower tier cities such as Sanya (0.3%, 1.1 ppts), Shaoguan (1.3%, 0.9 ppts), Zhanjiang (0.9%, 0.3 ppts), and Nanning (1.3%, 0.3 ppts). The central region recorded the steepest drop off in price growth, decelerating by 61 bps to 0.51% MoM growth. Only Changsha recorded a pick up in growth rates in the central regions, accelerating by 0.5 ppts to 0.7% MoM, the cities to record the most rapid deceleration included Luoyang (0.7%, -1.7 ppts), Yichang (0.0%, -1.4 ppts), Xiangyang (0.6%, -1.4 ppts).


Price growth in the leading cities continues to remain weak, while volumes in the first hand market remain down roughly 50% YoY in first tier cities and 20% in second tier cities. While policies designed to cool these leading cities are unlikely to be removed in the short term, the persistent weakness of these markets over the last couple of months could point to an increasingly likelihood that some of the more marginal policies might be relaxed in the next six months or so.

Lower tier cities that typically have fewer restrictions and healthier levels of transaction volumes and price growth are unlikely to see significant changes on the whole, though individual markets make tweak policies depending upon individual circumstances.

While it does not seem like it should be necessary for too many new measures in the near term to curb price growth, policy announcements are not unexpected. Proper enforcement of existing regulations and a review and fine tuning of existing policies is likely to continue. The government’s key aim at the moment seems to be a reduction in the cost of debt and the overall pace of growth of debt. This will undoubtedly have an impact on the market going forwards though the shift in policy at the moment seems to be gradual and the impact is likely to be also.


MoM: Month-on-Month

YoY: Year-on-Year

YTD: Year-to-date


Key Contacts

Olivia Shao

Olivia Shao

Marketing & Communications, Savills China

Savills Shanghai

+8621 6391 6688 Ext.8893