We have been getting conflicting messages about the house price situation in China recently. Since the beginning of 2014, house prices in China appear to have been generally static or even declining in some cities after following 5 years of massive escalation. Government have been churning out their usual statistics and those who were in for the quick, speculative buck have been getting itchy feet at the prospect of a flagging economy and static house prices with massive oversupply in some sectors.
We decided to do a review of what various sectors are saying:-
National Bureau of Statistics of the People's Republic of China publish statistical data of residential sales price among 70 large and medium-sized cities from January to April, 2014. The summary over that period is listed as follows:-
China Index Academy gives an analysis based on its statistical data of real estate price index among 10 large cities: Beijing; Shanghai; Guangzhou; Shenzhen; Tianjin; Wuhan; Chongqing; Nanjing; Hangzhou; and Chengdu.
New house sales prices were seen dropping on a month-on-month basis in 7 cities whilst still rising on a year-on-year basis in all 10 cities where Beijing shows the largest rise at 19.17%.. Only Beijing, Tianjin and Wuhan continued to show rising sales prices month on month. 
The network media of youth.cn, suggests that China’s house market is on the brink of collapse however there are conflicting views on how and why.
Some consider that which the first and second tier cities will suffer worse than the third and forth tier cities as determined by expected profit and capital cost. The capital amounts put into the first and second tier cities is far more than in third and forth tier cities, leading to their vunerability. However others suggest that prices in the first and the second tier cities will continue to go up whilst those in the third and forth tier cities will go down based on a house supply and demand perspective, where over-supply is more severe in the third and forth tier cities, leading to more falling pressure. 
The First Financial Daily published the comments of Pan Shiyi, Chairman of SOHO China, the largest prime office real estate developer in China, He noted that China’s house market is like “Titanic which is going to hit the iceberg”. After that, not only the house market, but the financial industry is at risk. He addressed 3 reasons:-
The Financial Times of London reported that the International Monetary Fund (IMF) has lowered its growth forecast for the Chinese economy next year from 7.3 per cent to 7 per cent or lower, amid concerns about a slowdown in the property market and a build-up of credit.
“A correction in China’s property sector is under way but the longer-term prospects for the industry remain good”, David Lipton, the number two official at the IMF, said in Beijing on Thursday. 
Chinese government spending surged in May as Beijing sought to boost flagging growth amid fears of a pronounced economic slowdown and a bursting property bubble.
Expenditure by local and central governments in China jumped nearly 25 per cent from the same month a year earlier, a sharp acceleration from the 9.6 per cent growth registered in the first four months of the year, according to figures released by the finance ministry.
Spurred by this year’s sharper than expected slowdown, the government has taken several steps to support growth, including ramping up state spending on infrastructure and gradually loosening monetary policy. 
Despite house prices seeming to be high to those in China I like to take an international perspective on it. Assuming that China is now a major international economy and that its leading cities are becoming equally internationally important we should be able to put their prices within that context.
The Economist has an interactive guide of the world’s housing markets, where house prices for China as a whole appear to sit within a middle band of international housing costs. 
On the other hand numbeo.com suggests house prices compared to income are the 5th most expensive in the world. Owch! 
Global Property Guide lists Shanghai as the 20th most expensive city for property at approximately US$ 7000/m2, well behind other major world cities. 
My feeling is that with China as the leading economic powerhouse for the short to medium term it would appear that there is plenty of slack for the premier international cities of Beijing and Shanghai, as well as some other first tier Chinese cities, to see further house price increases bringing them in line with their new international status. I expect to see the gap stretch with the fourth tier cities becoming cheaper whilst the first tier become more expensive. However don’t listen to me, this is what the people that matter think…