Moody's Investors Service says that rapid price growth of residential homes in Chinese cities -- and particularly in higher-tier ones -- could attract further regulatory tightening to moderate price growth.

"Residential home prices for China's 70 major cities extended their rising trend in April 2016. First-tier cities continued to see strong price growth, although the upward momentum on a month-on-month basis is moderating, particularly for Shenzhen," says Franco Leung, a Moody's Vice President and Senior Credit Officer.

The number of cities registering year-on-year price increases rose to 46 in April from 40 in March, and the number of cities reporting year-on-year price increases of more than 5% rose to 17 from 14 over the same period.

Robust price growth in Shenzhen, Shanghai, Nanjing and Wuhan already triggered regulatory tightening in their residential property markets in late March 2016. Shenzhen registered the highest price growth, at 63.4% year-on-year in April 2016, followed by Shanghai at 34.2%.

"We believe tightening in policy measures could be targeted at cities with strong price growth, but will not be applied uniformly nationwide. Policies will remain supportive in lower-tier cities, where property prices remain sluggish," adds Leung.

Leung was speaking on the release of the May issue of Moody's China Property Focus.

The monthly report also looks at nationwide home sales, which Moody's expects to moderate to a single-digit percentage for the 12 months ending May 2017, from 16.6% in 2015 and 32.0% for the 12 months ended April 2016.

This expectation reflects a comparison against a high base recorded in 2H 2015 and in 1Q 2016 when stimulus measures spurred strong sales growth.

Moody's says that further stimulus measures will have limited benefits, while selective regulatory tightening in higher-tier cities will lead to lower property demand in those cities.