Property activity continues declining as prices drop in more cities

China's property sector showed new signs of cooling in July, with more cities reporting month-on-month price drops, official data showed on Monday.

Out of 70 major Chinese cities, 64 saw month-on-month price declines for new homes in July, compared with 55 in June, the National Bureau of Statistics (NBS) said in a statement.

Only two cities -- Xiamen in southeastern Fujian Province and Dali in southwestern Yunnan Province -- saw month-on-month price gains in new home prices last month, compared with eight cities in June and 15 cities in May, the NBS data showed.

New home prices in Xiamen edged up slightly by 0.2 percent month on month while Dali prices rose by 0.1 percent.

Hangzhou, in east China's Zhejiang Province, saw new home prices drop the most among the 70 cities, down by 2.5 percent from June. Sanya, on south China's Hainan Island, dropped by 2.4 percent month on month.

For existing homes, 65 major Chinese cities saw price drops in July, up notably from 52 cities in June, according to the NBS. Prices of existing homes in Shenyang in northeast's Liaoning Province decreased the most by 1.5 percent from June.

Only one city, Xining in west China's Qinghai Province, recorded a month-on-month price gain for existing homes in July, up slightly by 0.1 percent from June, the NBS said. However, on a year-on-year basis, new home prices in 65 cities are still higher than a year ago, with only three cities seeing a price drop in July -- Hangzhou and Wenzhou in east China's Zhejiang Province and Shaoguan in central China's Hunan Province.

The growth rates in the 65 cities moderated significantly in July, said Liu Jianwei, a senior statistician at the NBS.

Liu said many home buyers were taking a wait-and-see attitude due to uncertain market prospects, which led to month-on-month drops in home prices in more Chinese cities.

The latest data added to signs that China's property market is experiencing an obvious downturn after torrid growth in previous years.

Earlier NBS data, including investment and sales figures and the property development climate index, all suggested the sector was continuing to cool and struggle.

In the first seven months, property sales in China dropped 7.6 percent year on year to 564.8 million square meters. The drop was 1.6 percentage points steeper than the decline seen in the first half of the year, according to the NBS.

In the second quarter of 2014, new housing starts and sales contracted for the second successive quarter as property investment cooled to its slowest pace since the second quarter of 2009.

"Within four months, new home price drops spread from individual cities, with only four in March and eight in April, to the record high of 64 cities in July. The pace of cooling in this round of property adjustments is faster than market expectations," said Zhang Dawei, chief analyst at real estate agent Centaline Property.

Zhang said the latest data suggested that the cooling trend was still evident. Growth of property investment decelerated for six months straight starting in February.

In July, monthly property sales stood at 81.15 million square meters, representing a year-on-year decrease of 16.3 percent and a month-on-month dive of 34 percent.

Zhang said rising inventory suggested that a housing oversupply has begun to show in some cities, and the removal of purchase restrictions on multiple homes, mostly in second- and third-tier cities where inventories are high, is unlikely to have much effect.

Amid sluggish sales, various forms of policy easing were seen in 37 of 46 cities that had previously imposed market control measures ranging from purchase limits on second homes to higher minimum down-payments, media reports said.

In Zhang's view, the credit policy and discounted mortgage rates offered by commercial banks to first-home buyers were meaningful and their impact on the market must be watched closely.