Property boom shifts to smaller cities

China’s property boom is shifting to smaller cities as government restrictions clamp down on sales in the nation’s largest urban areas, Bloomberg reported. Surging home values in less affluent cities, like Urumqi in the northwest and Dandong in the northeast, drove growth in new home prices in 67 of 70 cities surveyed in May. Purchase restrictions in first-tier cities have driven speculators to the second- and third-tier, said Liu Li-Gang, chief China economist at Australia & New Zealand Banking Group (ANZ.ASX). China must raise its currently negative interest rates if it wants to drive speculation from the property market, Liu said. Efforts to cool home prices by raising the required down payment on mortgages and restricting sales have had some effect on the market for existing homes: Prices of existing homes fell in 23 of the 70 cities measured in May, up from 16 cities in April, the National Bureau of Statistics announced June 18.