Price drops reflect widening gap in property market

Prices of new residential properties climbed in 62 cities around the country last month, compared to 65 in December, while six cities registered price drops, an increase of four from December, according to the National Bureau of Statistics, which tracks both new and existing housing prices in 70 major cities.

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Many are pessimistic about the industry and some even speculate that the country's property market is heading for a crash.

Wang Shi, founder of China's largest residential developer, China Vanke, said that "the situation is bad" for this year's property market.

Wang Jianlin, founder of property developer Dalian Wanda Group, said that the market is "not optimistic."

However, most analysts believe that housing prices are not likely to plummet in the near future, and the price drops come against the background of a widening gap between markets in big and small cities.

Liu Hongyu, researcher at Tsinghua University, said that first-tier cities and major second-tier cities are currently facing a shortage in residential properties, while third- and fourth-tier cities are under the pressure of oversupply.

Statistics from the National Bureau of Statistics show that in January the prices of new homes in the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen grew by over 18 percent from the same period last year. Shanghai has seen growth of 20.9 percent.

According to E-House, a leading real estate services company based in Shanghai, the average land price for first-tier cities reached 10,136 yuan per square meter in January, up 125.1 percent from the previous month and 253.1 percent from a year ago.

Experts predict that housing prices in the biggest cities and those in smaller cities will move in opposite directions, as shortages in the big cities and oversupply in smaller cities will persist this year.

JP Morgan Chief China Economist Zhu Haibin said the housing prices for first- and second-tier cities may increase by 10 percent and 5 percent respectively, while prices in third-tier cities will be stable in 2014.

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