Housing prices to diverge

Residential property models are displayed at an expo in Shanghai. In first-tier and some second-tier cities, more tightening policies may be imposed in 2014, experts say. Provided to China Daily

Home prices in China will experience greater regional divergence in 2014, with an increasing risk of price declines in smaller cities, industry experts said.

"It's a time of further divergence in China's real estate sector, whether in cities, enterprises or products," said Gu Yunchang, deputy head of the China Real Estate and Housing Research Association.

Marked regional divergences intensified in 2013 as prices rose, which was very different from the housing boom in 2009-2010.

Prices in first-tier cities rose much faster than elsewhere last year, driven up by a lack of supply and tougher curbs. In November, new home prices surged more than 20 percent in Beijing, Shanghai, Shenzhen and Guangzhou, according to the National Bureau of Statistics.

New supply increased much faster in smaller cities, with only moderate price rises.

Prices in third-tier cities (those below the provincial capital level) increased by 4 percent in November, "and housing affordability remains at an acceptable level", said Zhu Haibin, China economist at JPMorgan.

Given the price divergences, real estate policies will also differ, according to Huang Yu, deputy head of the China Index Academy.

In first-tier cities such as Beijing and Shanghai, and some second-tier cities, more tightening policies may be imposed in 2014. But in some third-tier cities, where supply is sufficient, policies may even be eased to stimulate demand, said Huang.

Economists and industry experts said home prices will rise again this year, although at a slower pace, with widening regional divergences.

"We expect house prices to increase 10 percent in first-tier cities and by 5 to 10 percent in second-tier cities. Prices in third-tier cities will remain flat in 2014," said Zhu.