The latest figures show property prices are rising at a slower rate across the country, a sign the government's macro-control measures are beginning to bite.
But prices in the second-tier cities, particularly Hangzhou and Dalian, are starting to pick up.
Housing prices in 70 major cities in September increased 8.9 percent, up 0.7 of a percentage point from the previous month, the National Development and Reform Commission said on Friday.
New residential homes rose 10 percent last month, up 1 percentage point from August, with second-tier cities including Urumqi, Beihai and Hangzhou leading the charge. Average prices of pre-owned residential apartments also increased 7.6 percent from the previous year.
Shuai Hu, a property analyst at Haitong Securities, said rising prices in second-tier cities are likely to accelerate in the coming years as urbanization speeds up.
"Housing prices in second-tier cities including Hangzhou, Changsha and Dalian are expected to increase even faster in the next one or two years," he said.
"But momentum in major cities Beijing, Shanghai, Guangzhou and Shenzhen will gradually subside."
The price of residential property within Shanghai's outer ring dropped an average 3.2 percent to 8,017 yuan per sqm, according to figures compiled by global property information provider CB Richard Ellis.
"Investors are expected to diverge further with the recent introduction of a tightening policy on second property purchases and as developers hold off launching new units," David Chen, senior director of residential project marketing at CB Richard Ellis, said in a report.
In Suzhou, a city near Shanghai, residential property prices have jumped 20 percent from the year before. The average price in the downtown area is now 10,000 yuan per sq m.
Zhou Lixiang is in her mid-30s and works at an advertising company in Suzhou. She bought a 130-sq-m home for 7,500 yuan per sq m in the new city area earlier this year.
She paid a 40 percent deposit on the apartment and her monthly mortgage payment is 4,000 yuan over 30 years. "I can live with the monthly installment - it's about 40 percent of my personal income and 20 percent of my aggregate family income," she said.
(China Daily October 28, 2007)