China’s home sales declined during the first two weeks of October, according to a survey, in a sign that government policies aimed at cooling the real estate market are taking effect. Sales volume in 54 cities in mainland China fell as much as 40 per cent from a year ago, while the total number of transactions declined 5 per cent to 130,944 units, according to Centaline Group. “The tightening policies have dampened buying desires,” said Zhang Dawai, chief analyst at Centaline. As many as 22 Chinese cities -- including Beijing, Shanghai and Shenzhen -- have imposed a slew of market-cooling administrative measures since September 30 to raise the down payment required on homes, while barring non-resident buyers from buying property. “The fall in sales volume will add to pressure for prices to adjust downwards,” Zhang said. “It will also extend to more cities if the central bank further tightens the lending policies.” China’s property prices had been surging, especially in the so-called first, second and third-tier cities , as easy loans combined with limited investment options to drive speculative capital into apartments and luxury villas. As prices surged in the biggest cities, speculators have flocked to smaller metropolitan areas like Hangzhou, Suzhou and Hefei to look for bargains, in turn driving up prices in these areas by as much as 40 per cent during the past 12 months. The smart money is now pouring into cities with less restrictive measures such as Jiaxing, about 30 minutes via high-speed train from downtown Shanghai, according to JLL’s research head Joe Zhou. “Besides real estate, there are not many investment options in China,” Zhou said. “Investors will begin treasure hunting in nearby cities where apartment prices have lagged behind the rest of the nation.” Jiaxing, a prefectural city in Zhejiang province, reported a record 37,894 property deals in the first nine months of the year, including apartments and offices, according to the research centre of Jiaxing property website, fccs.com. “The market is seeing early signs of cooling down, with some overheated cities seeing notable declines in housing translation volume after Golden Week,” said Alan Jin, head of regional property research (Asia ex-Japan) of Mizuho Securities Asia. Most Chinese cities now enforce a strict requirement of a minimum 30 per cent down payment for first-time buyers, in order to deflate the property bubble. New mortgage loans owed by Chinese individuals surged by 98.4 per cent to 3.63 trillion yuan in the first nine months of the year, or 35.7 per cent of total new lending in the first three quarters. In September alone, new mortgage loans increased by 76 per cent year on year, according to data released by the central bank on Tuesday. In August, new mortgage loans took up 71.2 per cent of total new loans, as home prices rose across China at their fastest pace in six years. “The growth rate of new mortgage loans is set to slow down with the property cooling measures brought by local and central governments taking effect, but the speed would not be drastic, as the market would land softly until early next year,” said Larry Hu, China economist at Macquarie Securities.