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China's red-hot housing market shows signs of easing

A real estate agent's office in Guangzhou, China.
Brent Lewin | Bloomberg | Getty Images
A real estate agent's office in Guangzhou, China.

China's home prices continued to surge in December, though the pace of gains overall did not exceed the previous month's and rises eased in some major cities, suggesting that government tightening measures may be starting to bite.

Home prices in many Chinese cities have continued to set records in the past year despite a four-year long government campaign to cool the market, adding to the threat of a price bubble and forcing some local governments into a fresh round of curbs in November.

Average new home prices in 70 major Chinese cities climbed 0.4 percent in December on the month, easing from November's 0.5 percent and the fourth straight slowdown since August's 0.8 percent gain, according to Reuters calculations from data released by the National Bureau of Statistics (NBS) on Saturday.

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"The slower home price gains in December showed recent curbs unveiled by local governments in tier-1 and some tier-2 cities have started to stabilize market expectations gradually," said Liu Jianwei, a senior statistician at NBS, in a statement accompanying the data.

Under pressure to rein in a red-hot housing market, many local governments have rolled out targeted measures to cool fast-rising property prices, including raising minimum down payments for second homes and promising to supply more land for building residential properties.

Prices in the capital Beijing rose 16 percent in December from a year ago, easing slightly from November's year-on-year increase of 16.3 percent, and the second month of slowing gains after a record jump in October.

In the southern cities of Guangzhou and Shenzhen, gains eased to 20.1 percent and 19.9 percent respectively from 20.7 percent and 20.6 percent in November, their first slowdown this year.

Still high, no easing of curbs

Still, the government measures are yet to significantly curb buyer appetite and property inflation.

(Read more: China outstrips US as world's biggest goods trader)

The NBS data showed nationwide new home prices rose 9.9 percent in December from a year ago, the 12th consecutive annual rise and the same as the previous month's record gain.

The relentless rise of home prices suggests Beijing won't let up on its tightening measures anytime soon.

China's housing minister said in December the government would maintain controls on the property market in 2014 while increasing land and housing supply in cities facing big home-price increases.

More recently, local media reported on Monday the land ministry plans to form a nationwide property registry database, seen as a precursor to any country-wide expansion of property taxes, which have been on trial in Shanghai and Chongqing since 2011.

However, efforts to get the database up and running have faced resistance from local governments and groups with vested interests.

China's property values have surged over 20 percent in the past four years, underscoring worries of a property bubble and social unrest as millions of first-home buyers are priced out of the market.

Policy makers want to avoid a sharp slowdown in the property market as real estate is a bright spot in a slowing economy. The sector supports some 40 other industries and generates about 16 percent of the country's $8.5 trillion gross domestic product.

The next several months will probably shed more light on whether Beijing has done enough to tame the market. Analysts say China's home price rises are likely to moderate in 2014 thanks to increased supply and impact of government measures.

A vibrant market for land sales in 2013 is also expected to translate into a surge in home supply this year, helping put the brakes on home prices gains.

(Read more: Can China contain high government debt)

The amount of new land supplied for residential property development hit a record high of 138,200 hectares in 2013, up 25 percent on the year, data from the Ministry of Land and Resources shows.

A Reuters poll in November had also predicted a slowdown in house price growth, with analysts forecasting a rise of 5.0 percent this year after a predicted 10 percent in 2013.

Reuters started its weighted China home price index in January 2011 when the NBS stopped providing nationwide data, only giving home price changes in each of 70 major cities.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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