BEIJING (Reuters) - Lydia Su said her heart jumped when she first heard a property in Shanghai’s tree-lined French Concession was on the market - even though it was no bigger than a bathroom - swept up in China’s latest property frenzy.

A general view shows Yanjiao, Hebei province, China, November 13, 2015. REUTERS/Jason Lee/File Photo

The 13.7-square meter (147-square foot) apartment, the detached annex of a villa, was priced at 1.8 million yuan ($267,169), which at about $19,500 per square meter ranks it among the world’s most expensive residential spaces.

Though Su eventually decided against the deal, she thought it was cheap.

“This is ‘small money’ compared to many other properties in China,” said the 27-year-old finance professional.

Looser government restrictions and easier credit last year have triggered a wave of speculative - and panic - buying. Official data shows Shanghai home prices are more than a third higher in September than a year earlier.

And homes in the French Concession are a cut above, with average prices exceeding 100,000 yuan per square meter, Su said.

Nationwide, new home prices were up 11.2 percent, the highest growth on record.

China’s biggest cities - Shanghai, Beijing, Shenzhen - have led the rise, but the frenzy is also spilling over into smaller cities in central China.

The surge has helped sustain China’s economic growth, which held steady at 6.7 percent in each of the first three quarters.

But when prices hit fever pitch at the end of summer, Chinese policymakers stepped in to warn about price bubbles and ballooning debts.

In early October, 15 cities announced cooling measures, including higher down payment ratios on second homes.

At the end of September, outstanding mortgages to individuals had jumped by a third to 17.93 trillion yuan from a year ago, China’s central bank said on Friday.

There are signs mortgages are crimping household spending, in an economy increasingly reliant on domestic consumption.

Analysts also warn that the bull market is bringing forward future demand, as people fear prices running away from them, which could lead to a destabilizing loss of momentum in the coming months.

“Our research showed half of the people we surveyed have brought forward their plan to buy a house this year,” said Wang Tao, chief China economist at UBS, citing a report that surveys around 3,000 people.

Concerns on sales momentum are also making real estate developers wary of starting new construction projects.

New starts fell 19.4 percent in September, the first year-on-year decline since December.

The property sector contributed 8 percent to gross domestic product growth in the third quarter, according to NBS spokesman Sheng Laiyun, so any weakening could reverse that effect.

NEW HOUSE, OLD CLOTHES

Shanghai was one of the earliest cities to announce restrictive measures in March. Rumors were rife that it would further restrict property purchases in September, which led to a jump in convenient divorces to allow couples to qualify to buy multiple houses.

In China’s tech hub of Shenzhen, 33-year-old head hunter Julia Qu said she was considering faking a divorce to skirt the 70 percent down payment rule on what could be Qu and her husband’s third flat, valued at 3 million yuan.

“Faking divorces in China is very easy. All you need to do is to get a document at the marriage registry. It’s not a real divorce,” she said.

Qu sold her second flat in early October, hoping to use the funds to cover the down payment. She said she wanted a bigger apartment for when she has children and her parents retire.

She is still burdened with monthly mortgage repayments from her first apartment.

“The total mortgages we are paying are close to our income. What is left is only enough for our basic expenses,” she said, noting that mortgage repayments commonly account for 80 percent of family income in Shenzhen.

“So there’s no more traveling, expensive restaurants or new clothes,” she said.

Beijing native Zoe Zhang is in a similar boat, though she bought her apartment early last year before the spike.

Her monthly salary of 7,000 yuan is mostly swallowed by the 5,600 yuan outgoings on her 1.2 million yuan mortgage.

“I used to travel twice or three times every year when I didn’t take the loan. Right now, considering the debt on my shoulders, I am only able to travel once per year,” she said.

A UBS report showed the ratio of house prices to household disposable income in first-tier cities had risen to 18 to 20 times from 14.7 times at the end of 2015.

“This puts China’s tier-1 cities’ affordability close to Hong Kong and more expensive than London,” the report said.

New buyers making such sacrifices will be hoping to follow in Zhang’s footsteps.

“I feel so lucky that I bought the apartment last year. Because right after I made the down payment, property prices started to jump,” she said.