* July home prices +0.7 on month vs +0.8 pct in June
* Prices rise +7.5 pct y/y in July vs +6.8 pct in June
* New home prices rise in 62 of 70 cities vs 63 in June m/m
* Signs of govt tolerance of a stronger property market -analysts (Adds details, comments)
By Xiaoyi Shao and Benjamin Kang Lim
BEIJING, Aug 18 (Reuters) - China's monthly property inflation moderated for a fourth straight month in July, although annual gains were the strongest this year, complicating policymakers' task of trying to cool the sector without stifling growth elsewhere.
Real estate, which directly affects about 40 other business sectors in China, is considered to be one of the crucial drivers of activity in the world's second-largest economy.
Signs of a gathering recovery in the property market coincide with other July data that suggested China may be steadying after more than two years of slumping growth.
Average new home prices in 70 major Chinese cities climbed 0.7 percent in July on the month, easing from June's rise of 0.8 percent, according to Reuters calculations from data released by the National Bureau of Statistics (NBS) on Sunday.
Compared with a year ago, new home prices rose 7.5 percent in July, the seventh consecutive rise and the biggest jump since the Reuters calculation started in January 2011.
"The July home prices in 70 major cities are still rising due to strong demand from first-time home buyers and recent rising land prices," Liu Jianwei, a senior statistician at NBS, said in a statement accompanying the data.
Despite having enforced strict controls on the property market for nearly four years, China still faces record home prices that are well beyond the reach of most ordinary citizens.
Home prices rose month-on-month in 62 of 70 cities monitored by the NBS in July, down from 63 in June, the NBS data showed.
New home prices in Beijing rose 14.1 percent in July from a year earlier, the fastest this year, compared with June's year-on-year increase of 12.9 percent.
Shanghai's prices were up 13.7 percent in July from a year ago, also the fastest this year, versus 11.9 percent annual growth in June.
China's failure to check house prices is partly due to controls clashing with the need of local governments for a buoyant property market where they can sell land to raise revenues.
Most cities have largely ignored a 20 percent capital gains tax on pre-owned home sales introduced by the central government in March. Only the capital city Beijing has implemented the tax.
The latest policy shift comes from the eastern city of Wenzhou, which has relaxed curbs on property purchases to let some people buy second homes.
But Wenzhou's property controls were always tougher than those of other Chinese cities, which barred only third-home purchases. So, its latest measure brings it in line with its peers, including Beijing and Shanghai.
House prices in Wenzhou, the only city among 70 Chinese cities to see annual price falls, dropped 2.4 in July from a year ago, the NBS data showed.
Analysts say Wenzhou's move does not signal an imminent easing in purchase curbs nationwide while investors increasingly bet China could soon loosen its near four-year-old property controls to shore up its economy.
Plans to raise funds announced since July by five property firms, including Xinhu Zhongbao, have not been carried out in the absence of approval from the securities regulator, which has kept its ban on new funding for developers.
The property sector is a rare bright spot in China's slowing economy, which is grinding this year towards its slowest annual growth in 23 years.
Heated property demand stems largely from a lack of investment options for domestic investors, with credit being pumped into real estate for quick returns, rather than into production, as exports and domestic demand slow.
Official data on July 9 showed revenues from Chinese property sales rose 37.8 percent on the year in the first seven months, easing from a 43.2 percent rise in January-June, though it was still higher than last year's 10 percent gains.
"In the coming months, we expect (property) sales growth to slow while new starts continue to recover at a modest pace to catch up with solid sales given the sentiment getting improved," UBS economist Tao Wang said in a note to clients before the data was released.
"Property activities continue to be an important source of stable growth in domestic demand," Wang added.
A July statement by the Chinese Communist Party's decision-making Politburo made no mention of a continuation of property controls, raising analysts' hopes that the government would avoid new real estate curbs, and perhaps even loosen up.
China does not have an official index for nationwide home prices. Reuters started its weighted China home price index in January 2011 when the NBS stopped providing nationwide data, only giving home price changes in each of 70 major cities. (Reporting by Xiaoyi Shao and Benjamin Kang Lim; Editing by Clarence Fernandez)