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China's second-tier cities post big property price gains as two-speed market develops

China's property is a two-speed market: Advisor

China's property market was running at two speeds, with a real need for housing helping fuel big price gains, a long-time Asia property analyst said.

Government data released at the weekend showed property prices in 70 major cities in China grew 6.9 percent in May from a year ago, accelerating from April's 6.2 percent rise.

Prices in the top-tier cities of Shenzhen, Shanghai and Beijing clocked on-year growth of 53.2, 27.7 and 19.5 percent respectively, while the coastal city of Xiamen posted price rises of 28 percent. Prices in second-tier cities Nanjing and Hefei also rose more than 20 percent, beating Beijing's on-year growth rate.

"It used to be the case where just about every city went up and down together, but that's not been the case in this particular cycle," Peter Churchouse, author of "The Churchouse Letter," told CNBC's "The Rundown ".

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With big price gains spreading to smaller cities, Churchouse, an analyst and investor who specializes in Asia real estate, said the Chinese property market was in its "second bull market since the Global Financial Crisis in 2008."

Although there were concerns of a bubble in some cities, the rise in property prices also reflects a real demand, he said.

"It's important for China as it moves from an export-led and investment-led to a domestic consumption-led economy that the property market be a big part of that domestic-led growth," Churchouse explained.

That property prices were rising was indicative not just of investment activity, but also a real need for housing, with 110 million to 120 million Chinese expected to move from the countryside to major cities in the next 10 years.

"Those people need to be housed so there is a genuine need and a genuine demand for housing in China," Churchouse added.

- Reuters contributed to this report.

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