Prices of new and existing homes in 70 large and medium-sized Chinese cities fell 1.2 percent year-on-year in February, the government said on Tuesday, the third monthly decline in a row.

The decline was 0.3 percentage points larger than the month-earlier level, according to a joint statement by the National Development and Reform Commission and the National Bureau of Statistics.

Prices of newly built homes in 30 cities dipped year-on-year last month, with the southern cities of Shenzhen and Guangzhou recording the largest declines of 16.3 percent and 8.9 percent, respectively.

On average, prices for newly built homes were down 1.8 percent from a year earlier. The decline was 0.4 percentage points larger than in the previous month.

Analysts said the price declines were a necessary adjustment that was helping squeeze the effects of a bubble out of China's real estate market.

"There was an unreasonable price surge in the past two or three years. For example, housing prices doubled year-on-year in 2007. It was crazy," said Yang Guohua, real estate analyst with Beijing-based HongYuan Securities.

A market contraction and capital shortage reflecting the unfolding financial crisis also dragged prices down, according to Yang.

Yang forecast improved housing sales in the second quarter, as government policies to encourage home-buying, such as tax cuts and improved loan terms, took effect.

However, prices were unlikely to rebound, he said, as domestic purchasing power would remain weak. "There will be neither a price hike nor a plunge this year," Yang said.

(Xinhua News Agency March 10, 2009)