* June home prices ease from May, second straight monthly
* Prices still up 4.2 pct on year but slowest gain in 15
* New home prices fell in 55 cities m/m in June vs 35 in May
* Decline seen continuing, analysts expect supportive
(Adds market reaction, new quote)
By Xiaoyi Shao and Kevin Yao
BEIJING, July 18 China's new home prices fell in
June from May for a second straight month and analysts forecast
the falls would continue - sparking a surprise rally in Chinese
property stocks as investors anticipated imminent government
Average new home prices in 70 major cities fell 0.5 percent
in June from the previous month, accelerating from May's 0.2
percent monthly drop, according to Reuters calculations based on
data issued by the National Bureau of Statistics on Friday.
Analysts expect the downturn could force local governments
to implement extra measures to support the market and safeguard
"This could be a turning point. The policy could be
accommodative and lending to first time home buyers could be
relaxed," said Wee Liat Lee, Hong Kong-based head of property
research at BNP Paribas.
"We saw policy actions each time when the number of cities
with price declines crossed the 50 mark in 2008, 2010 and 2011."
Chen Zhenggao, the newly-appointed housing minister, told a
meeting that clearing some of China's massive housing inventory
was a main goal for the second half of the year, the 21st
Century Business Herald reported on Friday.
Chen said local governments could set policies to stabilise
local property markets based on their own needs, suggesting
local authorities will be given more flexibility to act.
Expectations that property controls imposed over the past
five years to temper record prices may soon be loosened
triggered a surge in Chinese property stocks.
The CSI300 real estate subindex climbed 3.5
percent, the biggest one-day rise in over three months.
PRICE FALLS SPREAD
The NBS data showed new home prices fell in June from May in
55 of 70 cities polled, up from 35 cities in May.
The falling trend also spread to the country's wealthiest
cities. Shanghai and the southern city of Guangzhou fell 0.6
percent from May, while Shenzhen dropped 0.4 percent.
The worst month-on-month performance was in the eastern city
of Hangzhou, where prices fell 1.7 percent in June.
Existing-home prices also dropped month-on-month in 52
cities in June, compared with 35 in May.
Compared to a year ago, new home prices rose 4.2 percent in
June, slipping from the previous month's 5.6 percent rise and
the slowest annual growth in 15 months.
A mild cooling-off in the housing market will be welcomed by
policymakers who have worked for nearly five years to curb
Still, Beijing does not want to see the market crash and
efforts have already been made to stop property prices from
sliding any further.
Despite no outright easing of rules nationwide, policy
tweaks by nearly 20 local governments in the past few months
have made it easier to buy homes and banks have offered more
credit to buyers.
A senior central bank official was quoted this week saying
that Chinese banks increased their lending to the property
sector by 18 percent in the first six months of 2014 compared
with the year-ago period, in what he said was a "forceful" show
"The sales momentum in terms of year-on-year growth will
likely continue to improve, boosted by developers' more
proactive promotion campaigns, together with the increasingly
friendly policy environment and loosening liquidity in the
broader economy," Alvin Wong, a property analyst at Barclays,
wrote in a note to clients.
(Additional reporting By Umesh Desai in Hong Kong; Editing by
Jason Subler and Eric Meijer)