China’s new home prices for its 70 major cities rose 0.7% month-on-month in May, up from the 0.6% rise seen in April, and the highest month-on-month rise seen year-to-date; year-on-year prices were up 10.7%. Of the 70 cities, 67 recorded price increases which is unchanged from April.

Our thoughts: Despite the positive headline, looking closer at the details paints a slightly different picture as the market diverges into two speeds. For May, Tier 1 city prices rose of 0.3% compared to 0.6% previously, Tier 2 rose 0.6% which was equal to April, and Tier 3 was up 0.8% compared to 0.5% previously. While the government has stayed firm on general housing policy controls, especially those over the T1 markets, our expectations are for the government to allow localized adaptation of those controls, in particular for those cities who are facing slowing economies and rising housing inventories.