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In April, Chinese house prices data showed a further broadening of momentum across the 70 major cities that report.

For new housing, 65 cities reported price gains in April relative to March; that compares to 62, 47, and 38 respectively in March, February and January.

In contrast, momentum in the existing market failed to improve: at 51, the number of cities reporting gains was marginally down on March’s 54, but up from around 35 in January and February.

Relative to a year ago, new and existing housing price growth improved in April, albeit only at the margin. For tier-1 cities, prices for new and existing houses are up 31.5 percent yr (from 29.4 percent yr in March) and 36.1 percent yr (from 35.6 percentyr). Within tier-1, Shenzhen remains the clear leader, with new house prices there up 62.5 percentyr versus the next-best (Shanghai) at 28.6 percent yr. Shenzhen also has the strongest performing existing market, although the divergence is less obvious: 56.2 percent yr against 37.3 percent yr in Beijing and 30.1 percent yr for Shanghai.

Price growth in tier-2 and tier-3 cities remains a striking contrast against tier-1. For tier-2, new and existing house prices have risen 5.0 percent yr and 5.5 percent yr respectively (up from 3.6 percent yr and 4.4 percent yr). And in tier-3, prices are up just 1.6 percent yr and 1.3 percent yr (0.5 percent yr and 0.8 percent yr).

It is certainly a positive that prices are growing in tier-2 and tier-3 cities, but the uptrend is hardly robust. The divergence across the three tiers continues to suggest that, while established wealth is being put to use in the most-developed cities, conditions remain quite subdued elsewhere, with easier policy only having an impact at the margin.

So as to give longevity to the burgeoning upturn in residential activity, there is a need to limit speculative excess at the top while maintaining accommodation to other regional markets.

Clearly there is more work to do in this area.

‎Elliot Clarke is director and Senior Economist, Westpac, and can be contacted here.