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Tale of extremes: Despite residential sector cooling, major Chinese cities should be insulated from sharp declines in 2017
China’s residential property market has been a tale of extremes in recent years, with huge performance gaps often existing between top-tier and lower-tier cities, accompanied by oversupply in many of those lower-tier markets. But it has never been simply that top-tier cities are strong and lower-tier cities weak.
The reality is, tier alone is no indicator of a market’s strength. Even within the same tier, there have been hugely-divergent performance gaps. In 2016, for example, Tier 2 cities Hefei and Nanjing saw prices grow more than 40 percent, while Tier 2 city Dalian and many others have been largely flat. In Xiamen, a Tier 3 city, prices increased 46 percent, while in Jinzhou prices fell 4 percent.
It is no coincidence Hefei, Nanjing and Xiamen enjoyed huge price increases in 2016. All three cities have many positive fundamentals in common, such as location near a high-speed railway node, a positive net inflow of population, rich educational resources, and bein