BEIJING (Reuters) – China’s new home prices grew at a slower pace in August as a cooling economy and existing curbs on speculative buying put a dent on overall demand.

Chinese regulators have vowed to refrain from stimulating the property sector as they roll out measures to boost the broader economy hit by the Sino-U.S. trade war and slowing consumer demand.

Average new home prices in China’s 70 major cities rose 0.5% month-on-month in August, less than July’s growth of 0.6% and was the slowest increase since February, Reuters calculated from official National Bureau of Statistics (NBS) data on Tuesday.

However, it still marked the 52nd straight month of gains.

On a year-on-year basis, average new home prices in China’s 70 major cities rose 8.8% in August, compared with a 9.7% gain in July and the slowest since October 2018.

Most of the 70 cities surveyed by the NBS still reported monthly price increases for new homes, though the number was down to 55 from 60 in July.

The property sector has held up as one of the few bright spots in the world’s second-largest economy.

China’s property investment grew at its fastest pace in four months in August, data showed on Monday, in contrast to a protracted slowdown in industrial output and investment.

But some analysts said the rebound in investment was likely due to developers rushing to meet government requirements before they can start sales on growing financing pressure and worries about the market’s prospects as regulators have made clear that supervision is only set to tighten.

Yang Yewei, a Beijing-based analyst at Southwest Securities, noted some developers have opted to cut prices, although the government’s tight control over new launches suggests they may not tolerate large discounts.

A resilient real estate market has provided some cushion for the world’s second-largest economy as policymakers try to revive the ailing manufacturing sector and restore flagging consumer confidence amid an escalating trade war with the United States.

But regulators are walking a tightrope, as rapidly-growing household debt and ever-rising home prices have also deepened fears about a sudden market correction and concerns over housing affordability.

In a sign the government has turned more hawkish on its housing policy as it maneuvers to pump more credit into other areas of the economy, top Chinese leaders said in July they will not resort to using the housing market as a form of short-term stimulus.

Slower price increases may give the authorities breathing room as they refrain from stimulating the property sector but economists at Nomura expect some tightening measures to be eased around end-2019.

“Any attempt to stabilize growth by choking credit to the property sector could backfire,” they said, noting the sector comprises about one-quarter of China’s GDP.

China’s average residential property prices are estimated to rise 6% in 2019 from a year earlier, according to a Reuters poll published in August. The forecast was slightly higher than the 5% projected in the last poll conducted in March, but is significantly slower than the 9.7% gain seen in 2018.  

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