China's all-important property sector may be finally bottoming out after a year-long slump, with official data on Tuesday showing monthly home prices climbed for a third straight month in July.
Nationwide new home prices rose 0.3 percent on month in July, versus a 0.4 percent gain in June and May's 0.2 percent rise. On an annual basis, July prices fell 3.7 percent, compared to the previous month's 4.9 percent slide, indicating the market could be in the nascent stage of a recovery.
The nationwide house price index is a weighted average calculated by Reuters, based on data from China's National Bureau of Statistics.
Once red hot, real estate prices dropped sharply from April 2014 to May 2015 amid oversupply and cooling demand, helping push economic growth to a six-year low in the first three months of the year. The home-building sector, including related industries such as steel and cement, contributes 25-30 percent to gross domestic product (GDP).
China has a two-speed real-estate market, where home demand in first-tier cities like Beijing, Shanghai and Shenzhen is recovering, while high inventory levels plague lower-tier cities. But as monetary stimulus kicks in, the overall market is showing signs of life again.
China's central bank has cut interest rates four times since late last year, on top of measures including reserve requirement cuts for banks, lower down-payment levels and bigger tax break for home buyers. More fiscal and monetary policies are widely expected in order to fend off a renewed slowdown.
But analysts remain cautious.
Structurally, the market is still going down due to supply-demand differences between big and small cities but government policies have helped the market bottom out in the near-term, Du Jinsong, head of Asia property Research at Credit Suisse, told CNBC on Tuesday.
"Going forward, how many more rate cuts can we have? In cities like Shenzhen and Shanghai, banks are tightening mortgage lending because home prices surged a lot, and we also have new housing purchase restrictions," said Edison Bian, head of China property at UOB Kay Hian, referring to home purchase restriction (HPR) measures in Beijing announced on Friday that require residents to have three years of local working experience before buying a second home in the Tongzhou district.