Beijing's move to push property prices down is starting to show results, with the cost of a new home in major cities falling last month for the sixth consecutive month.
The central government began efforts to cool the red-hot property market two years ago amid concerns that home ownership was getting beyond the reach of average people.
Figures released by the National Bureau of Statistics show that prices fell in March in 46 of the 70 cities reviewed, up from 45 in February. Prices were stable in 16 cities and rose less than 0.2 per cent in eight cities.
First-tier cities including Beijing, Shanghai, Guangzhou and Shenzhen were among those that saw their prices decline for six consecutive months.
Alan Jin, an analyst at Mizuho Securities Asia, said prices would continue to fall for a few months.
'Developers will continue to have a tough time ahead, though most likely it will not be as bad as late last year,' Jin said.
'But developers are also adapting within the tight policy framework. They have set conservative sales targets, scaled back construction activities and cut prices. A number of Hong Kong-listed developers have tapped the capital market, while relatively smaller plays are having a tougher time than the big ones.'
Last week, privately run Hangzhou Glory Real Estate became the first developer to file for bankruptcy since the curbs on the housing market were introduced.
Raymond Ngai, an analyst at Bank of America Merrill Lynch, wrote in a report that the price cutting in Shanghai's suburbs had spread to the inner-city luxury districts, with some projects being offered at discounts of up to 40 per cent.
Sun Hung Kai Properties said about 30 flats at its Shanghai Arch luxury development had fetched 100,000 yuan (HK$122,800) to 130,000 yuan per square metre. The market had expected them to sell for about 200,000 yuan per square metre.
Fuelled by the price cuts and discounts on mortgage interest rates for first-time homebuyers, sales rebounded sharply last month.
Bank of America Merrill Lynch said sales of new homes in 14 key cities it monitored climbed 53 per cent to 2.4 million square metres for the week to April 15.
However, sales in first-tier cities are down 17 per cent on a year ago, and the volume in the 10 top tier-two cities was down 1 per cent, it said.
Morgan Stanley analyst Brian Leung expects new projects to be launched on the Labour Day holiday on May 1 will boost sales.
'Developers with exposure to the mass market segment will be the main beneficiaries of the partial recovery amid policy fine-tuning,' Leung said.
The statistics bureau said prices for new homes in Beijing fell 0.4 per cent last month from February, while in Shanghai they dropped 0.2 per cent. In Wenzhou, prices were down 1.1 per cent month on month.
'Now the nation is entering a critical stage in the implementation of austerity measures. We have to adhere to, and maintain, the tightening policy,' said Ma Xiaoming, a senior official at the bureau.