2nd LD Writethru-China Focus: Housing market continues to recover, pressure remains

China's real estate market continued to warm up in June, with fewer cities seeing new home prices drop for the fourth consecutive month.

On a monthly basis, new home prices fell in 34 of the 70 cities monitored by the government in June, down from 43 in May, according to data released on Saturday by the National Bureau of Statistics (NBS).

New home prices climbed in 27 cities, up from 20 in May, including Beijing, Tianjin, Shanghai, Guangzhou and Shenzhen.

Nine cities registered flat new home prices, mostly second-tier cities such as Changsha, Wuxi and Kunming, the NBS data showed.

For existing homes, 20 cities saw price declines on a monthly basis, while 42 cities posted gains.

China's property market took a downturn in 2014 due to weak demand and a surplus of unsold homes. The cooling has continued into 2015, with both sales and prices falling and investment slowing.

According to NBS statistician Liu Jianwei, home sales in top-tier cities where demand is high saw strong growth, while in less developed second- and third-tier cities, both new and existing home sales either stayed flat or dropped, with a narrowed rate of decline.

Year on year, 68 cities reported new home price drops, with Shanghai and Shenzhen being the only two exceptions with a 0.2-percent and 15.9-percent increase, respectively, the NBS data showed.

China's housing market is still under correction, said Li Peijia, a researcher with the Institute of International Finance under the Bank of China.

To combat the downward pressure, the central bank has cut the benchmark interest rate four times since November and reduced banks' reserve requirement ratio three times since February.

In March, the government eased down payment requirements for second-home purchases to 40 percent from the previous 60 to 70 percent, and exempted business tax for sales of homes purchased over two years ago.

Some local governments have also rolled back their restrictions on home purchases to help with the emerging signs of improvement.

However, Wang Tao, chief China economist at UBS, said abolishing purchase restrictions could have limited effects, as buying property as a investment is no longer attractive to most citizens, who expect home prices to fall further rather than rise.

Bank of Communications analyst Xia Dan echoed Wang in saying the release of purchase restrictions would not bring fundamental changes to the current anemic situation of China's property market.

The correction in home prices will last a rather long time, Xia said, adding that more cities will abolish purchase restrictions in the coming months, and those with large inventories could benefit.

Investment in China's property sector rose 4.6 percent year on year in the first half of 2015, slower than the 5.1-percent increase seen in the first five months, earlier NBS data showed.

China's economy posted better-than-expected year-on-year growth of 7 percent in the second quarter of 2015 and bold macro-control moves by the government and structural reforms are expected to pave way for steady improvement in the latter half of the year. Endi