Xian tops list of cities with biggest home price increases globally
- 20 per cent price jump in year up to September after influx of 800,000 new residents, according to Knight Frank study
- Hong Kong ranks seventh with an increase of 15.8 per cent in the same period
The northwestern city of Xian, home to China’s Terracotta Army and a population of nine million, reported the biggest increase in home prices globally in the year leading up to September, 2018, according to property consultancy Knight Frank.
The city, which did not feature in the Knight Frank Global Residential Cities Index last year, recorded a 20 per cent increase in residential property prices.
Xian’s property challenges speak to the problems of China’s second-tier cities
According to a report released by Knight Frank, “In March 2017, Xian’s local government eased residency requirements, which led to the arrival of over 800,000 new residents, strengthening demand and hence prices.”
The average transactional price in Xian jumped from 8,870 yuan (US$1,286) per square metre in June, 2017 to 12,721 yuan a year later, according to consultancy China Real Estate Information Corp (Cric). It has, however, stayed basically flat after that, at 12,737 yuan in November.
“The rapid price advance in the first half will not recur next year, but the market is still in an up cycle and the price is expected to pick up gradually due to robust demand,” said Zhu Yu, general manager of Cric’s Xian office.
A slowdown in prices would also be in line with the rest of China, thanks to a succession of restrictions and a high comparison base.
The country, as a whole, is widely expected to enter a downward cycle, with homes prices falling from a high base in 2018 because of continuous property curbs and bearish buying sentiment. Ratings agency Standard &Poor’s, for instance, expects China’s residential property prices have peaked and could fall by up to 5 per cent in 2019.
The rapid price advance in the first half will not recur next year
A cooling market in China’s biggest cities has preceded this anticipated national slowdown, as these cities are subject to much tighter policies than the country’s vast number of smaller cities. The average home prices in China’s tier 1 cities rose by just 1.5 per cent from a year earlier in November, compared with 29 per cent two years ago.
Xian is an outlier because of its particularly loose residency policy, which has contributed to a large population inflow. Chongqing, a city in western China with similar patterns of economic development, led all mainland China cities with an annual price growth of 12 per cent in the 2017 Knight Frank index. The growth in annual price increases reported by the city narrowed to 10 per cent in the period up to September 2018.
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The southern commercial hub of Guangzhou reported a retreat in annual price growth, from 9.4 to 4.3 per cent, this year.
In the top 10 cities with the fastest growth in home prices, Xian was joined by five other Asian cities, including Hong Kong.
The special administrative region, the least affordable city in the world, reported an increase of 15.8 per cent in home prices in the same period. It ranked seventh; last year, it ranked sixth.
But Hong Kong too recorded a turning point in July, with average home prices falling by 3.7 per cent between July and October, according to the city’s Rating and Valuation Department. Homebuyers became more – and remain – cautious amid rising mortgage rates, a slump in the stock market and uncertainty caused by the US-China trade war.
Xian in grip of housing boom after aggressive growth plan brings in new residents
Most brokers and banks expect residential prices in the city to fall next year, by between 7 per cent and 15 per cent.
Cities in the Asia-Pacific region have seen home price growth rates beat all other regions globally, with 6.2 per cent in annual growth on average, up from 3.3 per cent a year ago. All other regions reported a slower price gains, except for Latin America, Russia and Eurasia, according to the index.
