By Dominique Fong

BEIJING -- The pace of home-price growth in China quickened in February from a month earlier, supported mostly by smaller, outlying cities with fewer property controls.

The average price of new homes in 70 cities increased 0.33% in February from the month before, according to calculations by The Wall Street Journal based on data released Saturday by the National Bureau of Statistics. That compared with a 0.24% on-month gain in January. Figures exclude government-subsidized housing.

The monthly growth occurred mainly in smaller cities such as Sanya, a popular Chinese tourist destination, where home prices rose 1.3%, and so-called third-tier cities Shaoguan and Jiujiang which have no home-buying limits; both had a gain of 1.1%.Meanwhile, home prices were relatively steady in China's first-tier cities. In February, home prices fell 0.1% in Beijing and dropped 0.6% in Shenzhen from a month earlier.

The divergence underscores Chinese leaders' goal of supporting housing market growth in smaller cities, particularly those with oversupply, while clamping down on any cities experiencing price surges to avoid asset bubbles.

Property restrictions to curb price gains have been toughest in big cities but have spread to smaller cities too. For instance, Sanya just this week banned mortgages on third homes and raised down-payment ratios on second homes.

Property remains a key driver of China's economic growth. Natixis economists wrote in a recent report that they expect real estate supply generally "to continue to increase fast as economic growth is the key priority for China's leadership and the growth target cannot be reached without the real estate sector."

Compared with the same period the year before, average new home prices gained 10.6% in February, after a 10.7% increase in January.

New-home prices rose in 56 of 70 cities in February from a month earlier, compared with 45 in January. Prices of new homes rose in 67 cities in February from a year earlier, compared with 66 in January.

Write to Dominique Fong at dominique.fong@wsj.com

(END) Dow Jones Newswires

March 17, 2017 23:05 ET (03:05 GMT)

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