China's home prices rise at fastest pace in nearly a year in May

BEIJING (Reuters) - China's home prices in May logged their fastest growth in nearly a year, suggesting buyers are targeting smaller cities even as the government steps up measures to clamp down on speculation.

Average new home prices in China's 70 major cities rose 0.7 percent in May from the previous month - the best pace since June 2017 - compared with a 0.5 percent increase in April, according to Reuters calculations based on official data published by the National Bureau of Statistics (NBS) on Friday.

Most of the 70 cities surveyed by the Statistics Bureau still reported a monthly rise in prices for new homes. Sixty one cities posted higher prices in May, up from April's 58.

Compared with a year earlier, new home prices rose 4.7 percent, unchanged from growth in April, according to the NBS.

The biggest gains were seen in China's 31 provincial capitals, often categorised as "tier-2 cities", with prices up 0.9 percent in May from April, NBS said in a commentary accompanying the data.

Prices in smaller tier-3 and tier-4 cities increased 0.7 percent, it said.

The Chinese city of Dandong, which lies on the border with North Korea, was the top price performer for the second month in a row in May, growing a robust 5.3 percent, NBS data showed.

China has been battling against an overheating property market for over two years, with more than 100 cities introducing measures to cool home prices. But policymakers have also been careful not to tap the brakes too hard as real estate remains a major growth engine.

As housing prices in major cities have levelled off, policymakers have turned their focus to smaller cities where official efforts to attract talent may be driving fresh speculative demand. More than 40 cities rolled out new tightening measures in May to rein in a market rebound, the NBS said.

There are growing signs that Beijing is modestly easing policy in response to cooling economic growth.

New household loans, mostly mortgages, rose 16 percent in May from April, accounting for 53.4 percent of total new loans from 44.8 percent.

But the China Securities Journal said in a front-page commentary on Friday that curbs on the property market should remain tight. A bubble still exists in some hotspot cities, showing the need for stronger policies, the newspaper said.

(Reporting by Yawen Chen and Ryan Woo; Additional Reporting by Min Zhang; Editing by Jacqueline Wong)