UPDATE 1-China May property investment eases, construction starts dip sharply

BEIJING, June 14 (Reuters) - Annual growth in China's real estate investment slowed in May, the first falloff in three months, as government curbs cooled an overheated market and undermined investment, taking a toll on new developments.

New construction starts measured by floor area, a telling indicator of developer confidence and correspondingly volatile, grew 9.5 percent in the first five months of the year, moderating from a 11.1 percent rise in the first four months, the National Bureau of Statistics said on Wednesday.

In the month of May, starts almost halved to 5.2 percent from April's 10.1 percent, suggesting a sharp slowdown in the commencement of new projects, a Reuters calculation showed.

Property investment, which mainly focuses on residential real estate but also includes commercial and office space, eased to 7.2 percent in May from a year earlier, versus 9.6 percent in April, Reuters calculated from the National Bureau of Statistics' data.

Real estate investment is a major driver of the economy affecting more than 40 other sectors. But worries over the potential bursting of price bubbles in China's biggest cities have led to a flurry of government cooling measures in recent months as buyer demand appeared to be more resilient than expected.

The area of property sold grew 14.3 percent in January-May from the same period a year earlier, down from 15.7 percent in the first four months of the year, the NBS said.

But in May alone, sales grew 10.2 percent, compared with a 7.7 percent increase in April, reflecting a quickening in destocking of existing homes, a Reuters' calculation showed.

Inventory floor area in the first five months dropped at a quicker pace of 8.5 percent, compared to a fall of 7.2 percent in the January-to-April period.

Regulators continued to intensify the crackdown on speculators with more measures to close loopholes in a vast market.

In May, China issued draft new rules for property sales and leasing, requiring developers to promptly publish accurate price information for new homes on sale, barring them from charging various additional fees, hoarding unsold homes or spreading false information about rising prices.

Some cities have also announced more stringent measures such as introducing price caps on new units and setting a holding period before reselling a property is permitted.

Developers continue to be squeezed as authorities tightened controls on their funding channels. Bankers and developers told Reuters in May that China's National Development and Reform Commission (NDRC), which approves corporate debt issuance, has virtually stopped granting new quotas for offshore bond sales this quarter.

Chinese home-buyers also face rising borrowing costs. Some banks in major Chinese cities have reportedly raised mortgage rates according to media reports.

However, chances that property prices would fall across the board in the future are slim because housing supply remains short in the big cities, a top state think-tank said on May 15. (Reporting by Yawen Chen and Kevin Yao; Editing by Eric Meijer)