* Official figures show real estate rally is spreading
* Property agents say speculators seek bargains inland
* Raises concerns that more tightening measures needed
By Yawen Chen and Ryan Woo
CHANGSHA, China, Sept 30 Property speculators in
China are looking for the next big thing beyond the country's
major cities. And they may have found it in the inland city of
Shanghai, Beijing and Shenzhen have been the hottest
property markets for most of the year, although smaller places
such as the coastal city of Xiamen have been heating up too. Now
there are signs the wave is reaching further inland.
Until now, Changsha's home prices have been one of the
lowest among central provincial capitals due to ample land
supply, a more leisurely economy compared with its bustling
coastal cousins and subdued local demand.
But prices have jumped in recent months, catching many local
property agents by surprise.
"Prices have risen 2,000 yuan ($299.84) per square metre on
average in the past two months. That's almost a 30 percent rise
from July," said Hu Yi, marketing manager at Central Courtyard,
a residential project in Changsha targeting mid- to high-end
The sharp price rises in many cities are raising some
uncomfortable memories of the last big run up in home values,
which resulted in a property bust earlier this decade.
China's southern boomtown of Shenzhen, with tight land
supply and a fast-growing tech industry, has led the rally for
most of the year. But it lost its top slot in August to the
second-tier city of Xiamen where prices were up more than 40
percent from a year earlier.
Prices rose in 64 of 70 major cities from the previous
month, the highest in two years, government data shows.
There are even flickers of life in Zhengdong, a district of
the inland city of Zhengzhou that became a symbol of China's
property excesses because of rows of empty housing developments.
China property investment is also rising. Shortly after the
August home price data was released, a parcel of land sold for a
record price in southern China, the Shanghai Securities News
Mortgage demand is driving loan growth in July and August.
Indeed, the value of new mortgage loans is almost 70 percent of
the value of total property sales in 2016 so far, the highest
since mid-2009, UBS analysts said, citing figures from data
The government wants to keep the property sector as a driver
of economic growth as other areas splutter, so has an incentive
to allow healthy price rises. Still, some are concerned.
The central bank's chief economist, Ma Jun, was quoted
earlier this month calling for steps to "curb excessive bubbles"
in the property sector.
UBS Chief China Economist Wang Tao said it was time the
government tightened credit conditions for homebuyers.
The price gains are a "self fulfilling prophecy," she said.
"You buy when everyone is buying, that's the mantra. But at one
point, prices are too high to find anyone to buy from you, and
returns from rent are too low."
The government's "primary concern" should be to "limit the
liquidity" in the property market, Rosealea Yao, an economist at
Gavekal Dragonomics in Beijing said after the price data was
When China's property market saw similar price gains a few
years ago, 47 cities imposed restrictions on home prices. This
time around only half a dozen have done so, she said.
One factor driving speculators into the property market is
moribund stocks. Benchmark indexes have fallen
13-15 percent this year, although some of China's commodities
markets are rallying strongly.
After Xiamen, the inland city of Hefei saw the
second-biggest price gains in August, as out-of-town investors
from Shanghai swooped in.
Now property speculators complain that even Hefei is too
expensive, so they are searching for the next opportunity and
have found Changsha, agents and buyers said.
Chen Xiaochuan, marketing manager with local residential
property project Xiang-Shore Park said speculators make up about
a third of homebuyers in Changsha.
They are mainly from first-tier cities such as Shanghai and
Shenzhen, property agents said, but are also from Hefei, where
home prices have doubled since the start of the year.
"They saw what happened in Hefei and thought to themselves,
maybe Changsha will be the next Hefei," Chen said.
Despite claims by some property agents that the inventory of
empty homes is dropping to record lows in Changsha,
empty-looking apartment buildings are still a common sight.
China Index Academy data shows there are 126,945 homes, or
13.46 million square metres, sitting empty in Changsha.
"I came here alone, but met many fellow Hefei property
buyers along the way," 40-year-old Hefei businessman Zhou, who
only gave his surname, said as he listened to a sales pitch for
a new development. Zhou said he already owns three properties in
Hefei and some in Nanjing and Hangzhou, two cities near the east
GHOSTLY NO MORE?
In the Zhengdong district of Zhengzhou, the city's first
Starbucks cafe opened this month, surrounded by empty, shiny
office towers and residential blocks.
The shop manager said business would pick up in coming
months, thanks partly to the cafe's proximity to three
residential property projects.
One of them is The Park, a high-end project developed by a
subsidiary of Haima Automobile Group.
"We have already bought an apartment here, and we are
looking to buy a second one," a woman who goes by her last name
Wang told Reuters just outside of project's sales office.
Home prices in Zhengdong district have risen two-thirds this
year to 25,000 yuan ($3,747.56) per square metre on average,
sales manager Xu Zhou said. That is still less than half of
Shenzhen's average price of $8,104.
"We see a flux of buyers from people outside of Zhengzhou,
especially those from smaller cities in the same province," Xu
said, who apologised for his raspy voice, which he said was due
to one too many sales pitches.
And for Zhang Liyang, a sales manager at Greenland Group's
Zhengzhou office, the price surge in the past few
months came as a surprise, which meant missed opportunities as
she was entitled to employee discount rates.
"Even we didn't expect the prices to go up this much," she
(Reporting by Yawen Chen and Ryan Woo; Editing by Neil Fullick)