China’s new home prices rose in July as the property sector held up as one of the few bright spots in the slowing economy, although easing momentum in some markets took immediate pressure off regulators to unleash major new curbs to deter speculation.

Average new home prices in China’s 70 major cities rose 0.6 per cent in July from the previous month, marking the 51st straight month of gains, Reuters calculated based on National Bureau of Statistics (NBS) data on Thursday.

On a year-on-year basis, home prices rose at their weakest pace this year in July by 9.7%, slowing from a 10.3% gain in June.

Analysts said the moderate gains were a positive sign the market was not overheating. That helped the CSI300 real estate index recoup some of its earlier heavy losses following a major slide in global stock markets.

“Today’s data is actually pretty good, reflecting that tougher stance and not alarming at all,” said David Ji, Head of Research & Consultancy, Greater China at Knight Frank, referring to central policymakers’ July decision to not use the property market as a form of short-term stimulus.

“If I were a provincial official who has a ‘key performance indicator’ to hit, I would feel happy because it is clearly telling you the property market is off the peak.”

The politburo’s pledge in July not to overly stimulate the property sector, made at a high-profile work meeting, was interpreted by analysts as a warning to the investors against heavy bets on the market.

The Chinese government has clamped down on speculative investment in the housing market since 2016 to prevent a sharp correction as prices soared. There have also been growing concerns that high house prices are pushing up the cost of business and restricting consumer spending.

But efforts by some regional governments to attract talent through home purchase incentives, along with easing credit conditions have kept prices surprisingly resilient this year.

The majority of the 70 cities surveyed by the NBS still reported a monthly price increase for new homes, although the number of cities fell to 60 in July from 63 cities in June.

In a sign the market’s resilience may be waning in parts, property investment slowed to its weakest this year, data showed on Wednesday.

Chinese authorities have sought in recent years to contain risks in the often volatile property market while not undermining growth in the broader economy.

The property sector directly impacts over 40 industries in China and a fast deterioration would risk adding to pressure the economy, which is slowing due to weak domestic demand and an escalating trade war with the United States.

While tightening measures have been rolled out across hundreds of Chinese cities, price trends have been uneven across the country.

Prices are holding up better than expected particularly in top tier cities, said Rosealea Yao, China investment analyst with Gavekal Dragonomics. Average prices in the four tier-1 cities - Beijing, Shanghai, Guangzhou and Shenzhen rose - 0.3% from a month earlier, quickening from a 0.2% gain in June, NBS data showed.

Pingdingshan, a city of 4.9 million in central Henan province, was the top price performer in July, with a robust monthly gain of 1.6%.

But economists also caution that the negative impact on the sector from the central government’s increasingly hawkish stance will only start to become more pronounced in two to three months.

China’s banks extended surprisingly fewer new yuan loans in July, reflecting subdued demand. New household loans, mostly mortgages, fell to 511.2 billion yuan in July from 671.7 billion yuan in June. Tier-2 cities, which include most of the larger provincial capitals, increased 0.7% in July versus a 0.8% rise in the previous month. And Tier-3 cities rose 0.7% on a monthly basis, in line with June’s pace.

“I expect housing policies to tighten in China, especially for local governments that has infrastructure projects to support local GDP growth,” said Iris Pang, Greater China economist at ING.

Meanwhile, the yuan edged lower on Thursday as optimism around recovering US-China trade relations waned with no clear signs of fresh progress, keeping the currency in a tight range.

Complicating the negotiations, US President Donald Trump on Wednesday tied protests in Hong Kong to a trade deal with China, urging Beijing to seek a a humane resolution to the city’s months-long political crisis. His remarks on Twitter came after the US State Department said it was “deeply concerned” about Chinese paramilitary forces’ movements near the financial hub.

The comments dampened sentiment in the yuan, which hit a one-week high on Wednesday after Trump held off 10% tariffs on over $150 billion worth of Chinese imports, shortly after top US and Chinese trade officials spoke on the phone.

Reuters