Property prices in 70 major Chinese mainland cities recorded the first month-on-month decline in August since the country started compiling the gauge in July 2005, the country's top economic planner said yesterday.

The drop may herald further corrections of the property industry and would likely lead to stimulus government policies to help capital-stripped developers, industry analysts said. The average housing prices in the 70 mainland cities dropped 0.1 percent last month from July, the National Development and Reform Commission said on its Website.

Prices of new homes also dipped 0.1 percent in August from a month before.

The year-on-year increase of the mainland average property prices in August was 5.3 percent, the slowest pace in 18 months. The growth has slowed for seven straight months from a record high of 11.3 percent in January, according to the NDRC.

Prices of second-hand housing were unchanged in August from a month ago and were up 3.9 percent from a year before, the smallest rise since the nation started to track the index, the NDRC said.

The average property price in Beijing was unchanged in August from July while Shanghai posted a 0.2 percent month-on-month decline last month, according to the NDRC.

"It may be just the beginning (of a downward cycle)," said Wu Ke, a Zhongtian Investment Consulting Co analyst. "It's very likely that developers will gain support from the government in the coming months."

China's property industry has been plagued by steep drops in transaction volumes this year after the government raised minimum down payment requirements and hiked interest rates for people who hold more than one mortgage.

Yesterday's data release came after the People's Bank of China slashed the benchmark lending rates and lowered the amount of capital banks must set aside as reserves.

Industry analysts noted the reduction in borrowing costs were aimed at helping small and medium enterprises, especially exporters, as the central bank reduced more interest in short-term loans than long-term borrowing.

But developers may also benefit as the decline in banks' reserves may suggest a shift in the country's monetary policies.

"We believe the rates reduction shows a stance from the central government and may lay the foundation for provincial governments to map out detailed measures to boost the property markets," said Wang Deyong, a CITIC Securities Co analyst.

(Shanghai Daily September 17, 2008)