China's new home prices fell for the eighth consecutive month in April from a year earlier but were flat from March, adding to hopes that a property downturn which is weighing heavily on the economy is beginning to bottom out.
But analysts warned any recovery in the market will take some time given a huge inventory of unsold homes, and said the property sector remains the biggest risk to the world's second-largest economy, which looks set for its worst year in 25 years.
That will keep pressure on policymakers to roll out more interest rate cuts and other stimulus measures later this year to boost activity.
Average new home prices in China's 70 major cities dropped 6.1 percent last month from a year ago, the same rate of decline as in March, according to Reuters calculations based on official data published on Monday. But nationwide prices steadied from March, further narrowing from a 0.1 percent fall in the previous month.
Beijing saw prices rise, albeit modestly, for the second month in a row, while those in Shanghai rose for the first time in 12 months. But prices in many smaller cities, which account for around 60 percent of national sales, continued to fall.
"We expect home sales to see year-on-year growth in the second half of the year, and home prices in third- and fourth-tier cities to also bottom out in the second half," said Nomura chief China economist Zhao Yang.
"But the big impact for the overall economy is from property investment, where I don't expect a quick rebound in growth...that's why we forecast China will miss its 7 percent target (for 2015)."
Zhao said real estate investment, which comprises around 20 percent of China's GDP, may grow less than 5 percent this year, compared with 10.5 percent in 2014, knocking 1 percentage point off economic growth.
Data last week showed home sales measured by floor area rebounded 7.7 percent in April from a year ago, the first growth since November 2013.
But real estate investment growth continued to slow in the first four months of 2015 to the lowest since May 2009 as new construction slumped, impacting demand for everything from steel and cement to appliances and furniture.
Still, government measures seem to be slowing enticing some buyers back into the market. Mortgages rose 2.1 percent in Janaury-April from the same period a year earlier.
China relaxed tax rules and downpayment requirements on second homes in late March. Earlier this month, the central bank cut interest rates for the third time since November to lower companies' borrowing costs and stimulate loan demand.
"The price data are signaling an obvious bottoming out," said Gavekal Dragonomics economist Rosealea Yao in Beijing, adding the secondary market was leading with a 1.1 percent annualized monthly rebound.
The National Bureau of Statistics data showed new home prices in Beijing rose 0.7 percent in April from March, improving from a 0.3 percent rise in March from February, while Shanghai prices were up 0.6 percent after being flat in the previous month.
Liu Jianwei, senior statistician at the National Bureau of Statistics (NBS), said in a statement that prices are still polarized between first and lower-tier cities, with an average 1 percent monthly rise in the first-tier and 0.1 percent fall and 0.3 percent fall in the second and third-tier, respectively.
Of the 70 major cities the NBS monitors, 48 posted a monthly decline, down from March's 50.
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