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China new home prices fall for a third month in July

China's new home prices fell for a third straight month in July, according to Reuters calculations of official data released Monday.

Prices nationwide fell an average 0.9 percent on month, following a 0.5 percent fall in June. On an annual basis, prices rose 2.5 percent, compared with a 4.2 percent gain in June.

The Australian dollar, typically sensitive to China data, dipped to 0.9310 from 0.9320 before the data.

Prices in Beijing posted the first on-month fall this year, down 1 percent from June. While Shanghai priced dipped 1.2 percent, their third consecutive monthly fall.

Read MoreChinese home buyers play the waiting game

After skyrocketing in recent years, China's property prices are falling, as government-imposed restrictions took the wind out of the frothy market.

ChinaFotoPress | Getty Images

But there have been concerns a dramatic correction could trigger a hard landing in the housing market, which is estimated to contribute 15 percent of China's economy.

Still, analysts are in broad agreement that prices should stabilize in the coming months, as policymakers start to roll back housing curbs.

Beijing recently moved to encourage the top Chinese banks to step-up lending, especially to lower-income and first-time home buyers. State media have also reported of some 37 of 46 cities that previously imposed market cooling measures loosening some or most of their restrictions.

Read MoreIs China property done dirt cheap?

"What we've seen over the last 12 to 18 months, are policies aimed at clamping down the property bubble and those policies have actually worked. We've seen in the last 6 months, property prices coming down month on month, property sales volumes down about 8-10 percent and now we see property curbs rolling back," said Peter Churchouse, author and publisher of the Asia Hard Assets Report, told CNBC.

"The rolling back is creating slightly easier policy settings [which] will accelerate sales in the second half and accelerate earnings," he added.

According BofA Merrill Lynch, the key to volume recovery in the second half would still be credit policy.

"On the social housing front, 3.4 million units of affordable housing were completed by end-July, representing 71 percent of the target this year. The State Council issued a circular on shantytown redevelopment on 4 August. State-owned companies are encouraged to issue bonds for redevelopment projects, while the private sector will enjoy the same preferential policies as their state-owned peers in those projects," the bank said in a note.

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