China home prices cool on tough controls: report

China's once-sizzling property market is cooling as home prices faltered in big cities, including Beijing, in May on the back of tightened policy controls.

Home prices in sampled major cities recorded average month-on-month growth of 1.11 percent last month, down 1.2 percentage points from April, according to a monthly report released by the Chinese Academy of Social Sciences on Monday.

Prices in Beijing fell 4.09 percent, while those in surrounding cities also dipped: home prices dropped 1.97 percent in Tianjin and 8 percent in Langfang, a city in Hebei Province that borders Beijing.

Other cities that had seen home prices soar before the tightening, including Shenzhen, Suzhou, Hefei and Zhengzhou, saw lower or little change in prices month on month, according to the report.

In Beijing, home prices in Xicheng and Haidian districts, two areas with clusters of good primary and middle schools, saw sharper decreases than other districts due to new policies to curb school district house speculation.

In the past few months, authorities in major cities have introduced a spate of measures, including higher down payments, increased mortgage rates and tougher purchase restrictions, to rein in high-flying home prices and quash potential asset bubbles.

The market boom was also cooled by relatively tightened liquidity conditions as China moved to deleverage the financial sector.

More home purchase restrictions and the tightened monetary environment will weigh on market demand in the short term, said the report, which predicted prices in previously red-hot markets like Beijing to continue the downward movement.

However, in the long term, limited land and environmental capacity will restrict housing supply in big cities and threaten to push home prices higher, according to the report.