BEIJING, July 18

Chinese home prices rose for a second month in a row in June, on a monthly basis, indicating that government efforts to boost the struggling property sector have started to gain traction.

Average new home prices rose 0.4 per cent in June versus May, according to Reuters calculations from official data published today. That was a faster gain than the 0.2 per cent rise in May, the first monthly increase since April 2014.

The second month of rising prices is a sign of bottoming out for one of the country’s key sectors and should ease fears of a sharp slowdown in China’s economy. On Wednesday, China reported annual growth of seven per cent in the second quarter of this year.

A mild recovery in the market could be welcomed by the government as long as it does not turn into a swift rebound, which would risk of rekindling property bubbles.

Sheng Laiyun, spokesman of the National Bureau of Statistics (NBS), said on Wednesday the property sector had shown marked improvement in the second quarter, boding well for the broad economy.

Still, high inventories of unsold homes have weighed in most small cities and developers have slowed the pace of construction, underscoring the unlikeliness of a quick recovery in the property market this year.

“There are many Chinese cities sitting on a sizeable inventory of unsold homes. That’s not easy for home prices to be up in those cities,” said Liu Yuan, head of research at property consultant Centaline in Shanghai.

Official data this week showed China’s unsold floor space totalled 657.4 million square metres at the end of June, up 20.8 per cent from the same period a year ago.

The government in the past few months has relaxed tax rules and cut downpayments for second-home buyers.