Chinese real estate developers rallied sharply on Friday after official data showed house prices rose at their slowest pace so far this year.
China real estate stocks Poly Real Estate and China Vanke initially eased after the data was released, but later rebounded and were up nearly 6 percent and near 4 percent, respectively, by mid-morning in Asia. Meanwhile Beijing North Star rose 1.2 percent and Gemdale rose 0.6 percent.
Analysts told CNBC investors took the as an encouraging sign that policy makers would likely ease restrictions on the sector.
"If the Chinese economy is really going to grow 7.5 percent, which is the government's target, then they will likely relax further these home purchase restrictions to stabilize the economy and help them achieve the target," said Francis Cheung, head of China and Hong Kong strategy, at research house CLSA.
Average new home prices in China's 70 major cities rose 4.2 percent on year, slower than May's 5.6 percent rise, according to Reuters' calculations based on data released by the National Bureau of Statistics (NBS).
On a month-on-month basis home prices fell 0.5 percent, marking their second consecutive monthly drop after May's 0.2 percent decline.
China's house prices increased at double digit rates throughout most of last year, but began cooling towards the end of 2013 as government tightening measures started to take effect. However, many industry watchers have grown concerned that a too sharp slowdown in the property sector could spell bad news for China's overall economic growth.
"The data today shows that there are more cities that are correcting – and things aren't great, so this will help indicate that they [the government] need to do more to stabilize the property market," added Cheung.