“We expect more cities to impose curbs in the future.”

Average new home prices in China’s 70 major cities rose 0.7 percent in May from the previous month, in line with April and remaining the quickest gain since October, Reuters calculated from an official survey out on Monday.

Compared with a year ago, new home prices rose 10.4 percent in May, easing from a 10.7 percent gain in April, Reuters calculated from National Bureau of Statistics (NBS) data.

Policymakers have prioritised stabilising an overheated market ahead of a Communist Party reshuffle later this year, reiterating the need to avoid dramatic price volatility that could threaten the financial system and harm social stability.

The housing bureau in Guangdong province’s Qingyuan city said last week prices for pre-sold new units must be sold at no more than 5 percent higher or no more than 15 percent lower than in similar projects in the area in the past month, effectively setting a price cap and floor to stabilise the market.

The NBS said price growth for new homes in China’s 15 most overheated cities – mainly provincial capitals with the most stringent curbs – has remained “basically stable” from the previous month as city-based control measures continued to take effect.

Prices for new homes in China’s biggest cities such as Beijing and Shanghai stopped climbing in May on a monthly basis, while prices fell 0.6 percent in Shenzhen, the fastest seen in three months.

Compared to a year ago, Beijing, Shanghai and Shenzhen prices still grew 13.5 percent, 11 percent and 5.4 percent, respectively.

The actions of authorities, who also stressed the need to actively push for inventory destocking in smaller cities experiencing a housing glut, have spread investor activity more broadly rather than halting it outright.

Investors, banned from the hottest markets, are increasingly looking inland, driving up prices in more remote, smaller cities with fewer buying restrictions, leading to a surprise pick-up in May sales.

For example, Bengbu, a mid-sized city in central China’s Anhui province, topped the list in May, with prices of new units rising 3.4 percent on-month, compared to a 2.2 percent gain in April.

Price growth in smaller third-tier cities rose to 0.9 percent in May from April’s 0.8 percent, CBRE’s Xie said. The Statistics Bureau does not release price index data by market tiers.

Central bank data published last Wednesday showed Chinese banks extended more credit than expected in May, with home loans expanding even as policymakers struggled to rein in riskier borrowing without impeding economic growth.

Household loans, mostly mortgages, rose to 610.6 billion yuan in May from 571 billion yuan in April, accounting for 55 percent of total new loans last month, up from 52 percent in April, the data showed.

But analysts say new tightening measures introduced since mid-March have started taking some heat out of the market, and property investment is likely to have peaked following a sharp drop in sales because of such curbs.

Indeed, annual growth in China’s real estate investment slowed in May, the first fall-off in three months, taking a toll on new developments. New construction starts almost halved from the previous month, official data showed last Wednesday.

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