Housing market shows signs of cooling after decade of growth

Higher mortgage rates, concern over impact of tax reduce volume of transactions as year gets underway

Experts say there are signs of cooling in the Chinese property market after a decade of growth, with the transaction volume starting to fall and mortgage rates rising nationwide.

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Jia Kang, head of the Institute for Fiscal Science Research under the Ministry of Finance, said China's housing market also showed signs of a differentiation in prices in January, which may lead to a price slump in second- and third-tier cities, although prices in Beijing and Shanghai are likely to maintain their current level.

"Although precisely how the trend in differentiation will develop is yet to be seen, second- and third-tier cities will be more vulnerable than Beijing and Shanghai during this round of market fluctuation," he said on the sidelines of a news conference of the Hainan-based China Institute for Reform and Development in Beijing on Friday.

Jia advised investors to take care when making investment decisions.

China's real estate sector showed signs of cooling at the beginning of 2014, with most of the nation's cities recording falling transactions on both a yearly and monthly basis. Prior to that, the Chinese property market witnessed 12 years of sustained growth.

According to the real estate research institute China Real Estate Information Corp, shrinking supply and tightened mortgages played important parts in the drop in the number of transactions.

Li Wei, head of the Development Research Center of the State Council, said in a recent speech on the Chinese economy that new home construction may be slashed given the high stockpiles of homes in third- and fourth-tier cities, where supply has exceeded demand.

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