Growth in the Chinese property market slowed last month as recently introduced government restrictions began to take effect.
The slowdown was the first drop that has been reported for three months and has been directly attributed to the cooling measures brought in during recent months.
According to Reuters, the growth rate of new construction starts measured by floor area almost halved on a yearly basis from 10.1% in April to 5.2% in May.
Chinese investors are increasingly looking inland since they have been restricted from buying in the main cities, therefore driving up prices in more remote, smaller cities with fewer buying restrictions.
“It’s been very obvious in the past two months that the buying demand has spilled over to the third- and fourth-tier cities,” commented Joe Zhou, head of research for China at real-estate agent Jones Lang Lasalle (JLL).
“[But] this kind of spill-over demand is at its peak, and probably will only last for one or two quarters.”
In May, Chinese authorities implemented new rules that required developers to publish accurate price information for new homes on sale. It also banned them from charging extra fees, hoarding unsold homes or reporting false information regarding property prices.
Some Chinese cities have also implemented additional measures such as price caps on new homes and introducing a holding period before reselling a property is allowed.
In addition, some banks in major Chinese cities have raised their mortgage rates – all of which has resulted in the price slow down.