2nd Ld-Writethru-China Focus: Property market slides with narrowing price drops

China's real estate market continued to weaken but with narrowing price drops in March, leaving analysts to expect a further rebound with new relaxed mortgage rules.

Of 70 large and medium-sized cities surveyed, the number that saw new home prices dip on a monthly basis in March stood at 50, 16 fewer than in February, the National Bureau of Statistics (NBS) said on Saturday.

For existing homes, 48 cities saw month-on-month price declines in March. That was 13 fewer than in February, and the number of cities reporting price increases rose to 12 from five in February.

In March, new home prices in Beijing grew 0.3 percent month on month, and existing home prices in Beijing and Shenzhen both rose 0.5 percent, respectively.

Along with weak prices, the home sales volume surged 65.9 percent to 270,000 units in March from the previous month, according to the NBS.

"The effect of the week-long Spring Festival holiday, which caused an anemic sales volume has disappeared," said NBS senior statistician Liu Jianwei.

Chinese authorities on March 30 decided to relax mortgage rules for second home buyers to address demand for better housing and lift the sagging property market.

Minimum down payment levels for second home buyers will generally be lowered to 40 percent from the current 60 to 70 percent, and minimum down payments for second home buyers using public housing funds will be cut to 30 percent from the current 60 percent.

For first home buyers using public housing funds, the minimum down payment will be reduced to 20 percent of the home's value, down from the current 30 percent.

"The new policy will further stimulate sales," said Liu.

"The measures came out at the end of March, which meant they contributed less to the narrowing declines, but they are expected to greatly improve April's and future property market performance," said Xia Dan, chief researcher with Bank Of Communications' Financial Research Center.

The NBS data showed that total investment in the real estate sector went up 8.5 percent to 1.67 trillion yuan in the first quarter this year, 1.9 percentage points slower than that in the first two months.

"Weakening investment remains a burden on China's economic growth," Xia said. "Loosening the connection between the property market and overall economic development is a crucial task."

He predicated the government will not lessen the purchase limit in first-tier cities like Beijing and Shanghai, where demand still surpasses supply.

Meanwhile, the picture in smaller cities is still grim, mainly due to high inventories resulting from years of rampant investment in real estate, which was extremely lucrative for local governments.

Zhang Dawei, chief analyst with property information provider Centaline, forecast that the sales volume will recover in the second and third quarter of the year.

Premier Li Keqiang said last month that he hoped to see "steady and sound development of the real estate market".

The 2015 government work report also said China will stabilize its property market, with tailored, market-based policies.

China's real estate sector began to see slumps in prices and sales volume last year, prompting authorities to loosen regulations previously put in place to rein in rocketing prices mainly fueled by speculative purchase. Endi