China’s residential market, running hot a year ago, has clearly cooled as a result of tightening measures introduced by the government. The restrictive measures are the toughest in history, and their implementation has moderated price growth nationwide while notably decreasing transaction volume in some major cities, according to Richard Yue, CIO and CEO of ARCH Capital Management in Hong Kong.

But cool does not mean cold: Prices are still increasing but at a lower rate. “We have not seen any signs of meaningful price correction in most major cities of China,” says Yue. Still, he believes the policies have somewhat changed people’s expectations that prices will continue to rise indefinitely.

The aim of this round of policies has been to prevent overheating in Tier 1 cities — Shanghai, Beijing, Shenzhen and Guangzhou — and leading Tier 2 cities, such as Hangzhou and Nanjing, while supporting the ongoing de-stocking of lower-tier cities where there has been o