Home prices drop for third month

Buyers adopt wait-and-see attitude amid uncertain outlook

China's new home prices fell in July for a third straight month with price declines spreading to more cities including Beijing, according to data released Monday by the National Bureau of Statistics (NBS).

The latest data underline a worsening property downturn that is increasingly dragging on the economy, analysts said.

Average new home prices in 70 major cities fell 0.9 percent in July from the previous month, accelerating from June's 0.5 percent monthly drop, according to Reuters calculations based on data issued by the NBS.

The NBS data showed new home prices in July fell in 64 of the 70 cities that were surveyed, up from 55 cities in June.

The worst month-on-month performance was in Hangzhou, capital of East China's Zhejiang Province and Sanya, a hot tourism destination in South -China's Hainan Pro-vince, where home prices both sagged 2.4 percent in July.

The downward trend also spread to the country's big cities. In Beijing, prices slipped 1 percent from June in their first decrease in over two years.

"Uncertainties over the outlook of the property market have kept potential homebuyers standing on the sidelines," Liu Jianwei, a senior statistician with the NBS, said in a statement accompanying the data.

China's once-heated housing market has slowed this year as sales and prices turned south in their biggest pullback in two years, driven by the cooling economy and the government's five-year-long campaign to keep price rises in check.

Analysts believed the downturn could persist in the coming months due to high inventories and sluggish sales.

"We expect home prices to continue to drop in the coming months due to an increasingly pessimistic market sentiment," said Yan Yuejin, a property analyst at real estate services firm E-House China in Shanghai.

The fall in home prices adds to concerns about the health of the Chinese economy.

At least 30 local governments, which earn a large part of their revenues from selling land, have openly or quietly relaxed home purchase restrictions this year, according to data from private consultancies.

"Reports of a rising number of cities relaxing home purchase restrictions are encouraging, though with a large inventory overhang, they provide no hope of a quick rebound in prices," Prakash Sakpal, an economist at ING, said in a research note.

Even if the slowdown lasts for more than a year, a market collapse is seen as unlikely if local governments continue to relax controls and banks keep credit ample, according to a -Reuters analysts poll last month.