The People's Bank of China's (PBOC) call on the nation's major lenders to give priority to first-time home buyers when allocating credit marks a policy shift for the government that has been on a near-five-year tightening campaign to cool the market.
"It's clear that Beijing is concerned about the pace of cooling in the residential real estate market," Dariusz Kowalczyk, senior economist and strategist at Credit Agricole told CNBC.
"This is a very clear change in direction of policy - that's why the equity market has reacted so positively," he said.
The Hang Seng Properties Index rose almost 2 percent on Wednesday - following news the central bank had asked commercial banks to speed up the process of granting of home loans and to set mortgage rates at reasonable levels late Tuesday.
Tight mortgages are a factor behind the property market slowdown this year as lenders have raised home loan rates for first-time buyers or delayed granting mortgages due to tighter liquidity.
China's home price inflation slowed to an eight-month low in March. Average new home prices in 70 major cities rose 7.7 percent on year, easing from the previous month's 8.7 percent rise, according to Reuters' calculations.
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Meantime, home sales in the four months ended April fell 9.9 percent, after slumping 7.7 percent in the first quarter.
Economists read the PBOC's move as a form of targeted policy easing to mitigate the decline in property sales.
"Credit is the most important driver of the property market - the policymakers have realized which lever they need to pull to arrest the downward trend," said Wei Yao, China economist at Societe General.