August 18, 2015 / 2:21 AM / 4 years ago

UPDATE 3-China home prices rise for third month in July

* July home prices +0.3 pct m/m, -3.7 pct y/y

* New home prices rose m/m in 31 cities versus 27 in June

* Modest recovery underway, good sign for economy (Adds B&Q comment)

By Kevin Yao and Xiaoyi Shao

BEIJING, Aug 18 (Reuters) - Chinese home prices rose for a third consecutive month in July, fuelled by a pick-up in sales and market sentiment, a rare counterpoint to a growing list of grim indicators in the world’s second-largest economy.

Average new home prices rose 0.3 percent in July versus June, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Tuesday, slightly slower than June’s 0.4 percent rise.

Even a modest recovery in a sector that accounts for around 15 percent of GDP is a welcome boost for an economy heading for its weakest growth in 25 years.

Property sales bottomed out during the first half of 2015 after declining for more than a year, propped up by a barrage of government support measures since last September, including a series of interest rate cuts and lower downpayment requirements.

Exports have tumbled, investment growth has hit repeated lows, and the stock market crashed 30 percent in a matter of weeks, keeping policymakers busy with an unprecedented array of support measures, including a currency devaluation and repeated attempts to increase lending.

Some of those measures, along with gains made on stocks in a 150 percent run-up in the year before the crash, have helped buyers like Lilian Liu, a 33-year-old worker in the tourist industry, who purchased a second home in the eastern city of Hangzhou last month.

“It’s the policy that makes it possible to buy my second apartment. Without lower down-payments, I couldn’t make the decision this time,” she said.

While policy measures and increased lending helped fuel a wave of pent-up home buying in recent months, a huge overhang of unsold houses in smaller cities is keeping the sector under pressure.

China’s overall real estate investment growth continued to slow in the first seven months of 2015, but property sales and housing investment improved.

Compared with a year ago, home prices still fell 3.7 percent in July, easing from the previous month’s 4.9 percent drop, Reuters calculated from NBS data showed.

China Vanke, the country’s largest property developer, said on Monday that the housing market was slowly emerging from a year-long slump, but it would take time to see a full recovery.

“The number of land acquisitions has decreased, and inventory is slowly being digested. It’ll take time, but it’s confirmed that a recovery is ongoing,” said Vanke President Yu Liang.

FIRST TIER LEADS THE CHARGE

An uptick in the property market will also be welcomed by related industries, such as manufacturers and retailers of furniture and home appliances.

Qiong Zhou, marketing manager at home improvement chain B&Q (China), said the past three months had seen year-on-year growth, and monthly sales had kept growing since this year’s Spring Festival, which fell in February.

The NBS data showed home prices across China rose month-on-month in 31 of the 70 major cities monitored, up from 27 in June.

Prices in first-tier cities such as Beijing, Shanghai and Shenzhen have been leading the recovery.

“I’ve been watching the housing market for several months,” said a Beijing lawyer who gave his surname as Wang. “Upward is surely the direction of home prices in Beijing. A recent recovery in transactions helped me sell my first flat quickly and got the money to buy another one,” he said.

Beijing prices rose 1.0 percent last month from a year earlier, reversing June’s drop of 1.1 percent, while Shanghai prices were up 3.1 percent, compared with 0.3 percent in June.

The southern city of Shenzhen was the top performer, however, recording the fourth consecutive monthly rebound, up 23.6 percent in July from a year ago, following a 15.7 percent rise in June.

“We should pay high attention to overheating risks in some bigger cities,” said Yan Yuejin, a property analyst at real estate services firm E-House China EJ.N in Shanghai.

Reporting by Kevin Yao and Xiaoyi Shao; Additional reporting by Clare Jim; Writing by Will Waterman; Editing by Eric Meijer

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