China's medium-sized cities will see improvements in property prices this 2016, thanks to policy measures supplied by the government and the improving balance of supply and demand says analysts, South China Morning Post reports.
Analysts see Hangzhou, Nanjing which is in east of China and Chengdu in the west as two of the tier-two urban cities that will experience catch-up gains for 2016.
It is a difficult property market in the mainland for the past years, with exploding prices in larger cities like Beijing, Shanghai, and Shenzhen and a sluggish and price performance in smaller cities despite the oversupply.
Lee Wee Liat, who is heading Asia-Pacific property research at BNP Paribas, believes that it will be a promising next 12 months for the property prices in tier-two cities.
"We see supply is relatively limited but demand is growing, home sales have started to pick up since the second half of last year," Lee shares to the press in Hong Kong on Wednesday.
It has been a dramatically cool market for properties in medium-sized cities for the past two years, and according to BNP Paribas, each year saw a drop of land sales in those urban areas by 30 to 50 per cent.
Meanwhile, there are signs that spillover of unsold homes are starting to be drawn down.
Based on the data provided by China Real Estate Index System in end of November in the previous year, the three cities that had the lowest inventories among the 18 leading cities are the ones in China's eastern region, Suzhou, Hangzhou and Hefei.
Looking closely, the inventory is 4.5 months of unsold new homes in Hangzhou, while Shanghai is at 14.2 months; China's largest and second most expensive for average new home prices.
In 2015, new home prices in Hangzhou have been steady, only increasing 0.3 per cent which makes an average of 16,186 yuan (HK$19,143.62) for every square meter in December.
The increasing demand will unquestionably hold up home prices in second tier cities like Nanjing and Hang Zhou which are close to Shanghai, and Chengdu, west China's regional hub, according to Frank Chen, head of research of Greater China.
Chen believes that those cities have stable enough economy with an optimistic population growth.
