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No New Measures Likely Even as China Home Prices Stabilize

China is unlikely to introduce fresh measures to cool the real estate market even as home prices snapped eight straight months of decline in June and amid fresh rhetoric from the country's leader vowing to prevent a rebound in prices.

Apartments in China
Apartments in China

Instead, Chinese authorities would enforce existing rules more stringently, analysts say, such as discounted mortgages for first-time home buyers to make it easier for them to own property and restrictions on speculative purchases so that prices do not increase excessively. It is fine balance they have to strike, they added.

"I think they would continue with relaxation of first home purchase to see more transaction volumes and they would hope that developers would start to invest with the money they get from these home sales," Ding Shuang, Senior China Economist at Citi Investment Research, said. "They want to encourage some investment so this increase can be taken as a good sign."

According to data released by National Bureau of Statistics on Wednesday, home prices in Shanghai and Guangzhou increased 0.2 percent in June from May, the first month-on-month gain since June last year, while prices in capital Beijing increased 0.3 percent.

Property sales also expanded in June for the first time in eight months and revenue increased 6.9 percent on an annualized basis, snapping a seven-month losing streak.

The data follows comments from Chinese Premier Wen Jiabao earlier this month, pledging to prevent easing measures by central bankers from re-inflating the property market. The People's Bank of China cut interest rates for the second time in a month in July, to bolster slowing growth in the world's second-largest economy.

Dariusz Kowalczyk, Credit Agricole's Senior Economist & Strategist for Asia ex. Japan, believes that the price declines may be moderating and that the Chinese government would keep in place measures to ensure that the property market, an important component of the economy, does not collapse.

"Improvement in the housing market would reduce the biggest risk to the economy," he said. "It may not last as the government keeps sending signals indicating preference and policies to push prices lower.

However, it remains to be seen how decisive policy makers are given that economic growth has risen on the list of their priorities."

Ding says China has a renewed focus on encouraging investment to bolster growth, and the property sector is an important component of the push.

"From my point of view, what's important is actually investment.

Property investment growth has declined quite significantly. The hope is that if transactions continue to increase, property investors will start investing again. More transactions will improve funding conditions of developers."

- By CNBC's Jean Chua.

Contact Asia Economy

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