Second-tier cities outperform first-tier peers in China’s property market

First-tier cities are no longer the only option for Chinese homebuyers as prominent second-tier cities, with larger land supply and less crowded living environment, are drawing attention from both developers and end-users.

Among the second-tier cities with “first tier potential”, nine cities including Nanjing, Hangzhou and Suzhou have outperformed their peers and become the new matrix of investment opportunities.

Second-tier cities have also been leading China’s property market in some key indexes since early 2016. Among the top 10 cities that had most gross floor area sold from January to October 2016, nine are second-tier cities with substantial year-on-year growth. In terms of sales value, cities like Hangzhou, Nanjing and Tianjin are closing the gap with higher growth percentage.

Land acquisition value, as an indicator of future market sales , also demonstrates a favourable prospect for prominent second-tier cities. Heated land auction in cities with “first-tier potential” has catalysed the robust growth of land acquisition market, both in gross floor area and in sales value.

The advantages of second-tier cities over first-tier cities are overall more observable in the land market and also reflect that the current dominance by first-tier cities are being challenged by the rapid ascendance of second-tier cities, especially those top performers within.