China July home prices rise at quickest pace in two years

China home price growth sped up in July, but it may not be able to keep up the pace.

The cost of a house across China rose around 7.9 percent on-year in July, accelerating from 7.3 percent in June and 6.9 percent in May, marking the fastest growth since February 2014, Reuters reported on Thursday, citing its own calculations.

In top tier cities, the gains were much larger, with Beijing new home prices jumping 20.7 percent in July, up from 20.3 percent in June, Reuters reported. In Shanghai, new home prices rose 27.3 percent in July, up from June's 7.3 percent, Reuters reported.

But analysts expected the rally wouldn't have much further to run.

Alan Jin, a property analyst for Asia ex-Japan at Mizuho Securities, said the rally in prices in tier-one cities was way above sustainable levels.

"We think this rally is purely driven by liquidity, excess liquidity. It's a global phenomenon, but in China this is happening together with very weak macro-economic growth backdrop so we are quite concerned. In the next year, we think the GDP data, etc, will be pretty weak," Jin told CNBC's "Squawk Box."

Other analysts noted that authorities had begun to tap the brakes, citing a few local governments, including Nanjing and Suzhou, taking steps such as raising down-payment ratios for second mortgages, increasing down-payments for developers' land purchases and resuming other restrictions.

In a note released before the July data, Moody's said the measures "will likely suppress sales by reducing the number of eligible buyers and hindering second-home buyers from upgrading to larger residences."

It noted that Nanjing and Suzhou were major second tier cities in China's Yangtze River Delta region.

"We expect further policy tightening in cities where price growth has been strong, and that the initiatives will likely lower property demand and price growth," Moody's said.


142663292WU013_THE_REAL_EST
Getty Images


Follow CNBC International on Twitter and Facebook.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1