China’s property prices picked up, led by first-tier cities

China's property prices continued to warm up, led by first-tier cities. New-home prices rose in 39 cities, compared with 35 in August, the National Bureau of Statistics said Friday. Prices dropped in 21 cities, fewer than the 25 in August, and were unchanged in 10. In the first tier cities, the new residential housing prices increased by 4.7%, 8.3%, 4.9% and 37.6% on a year-on-year basis in Beijing, Shanghai, Guangzhou and Shenzhen respectively. 

The pick-up in housing prices is largely driven by the eased policies, such as more relaxed mortgage policy and lower borrowing cost. Notably, while the property prices are rising, the housing investment continued to declined, gaining only 2.6% y/y YTD in September, compared with 10.5% for the whole year of 2014, as the unsold housing inventories remain elevated in the lower-tier cities. 

Given the overall supply conditions in China's property market, the rise of property prices will unlikely turn around the housing investment in the foreseeable future, says Commerzbank.