BEIJING -- "The rapid rise in property prices has been markedly contained, as the prices in some cities have begun to drop," the National Bureau of Statistics (NBS) spokesman Sheng Laiyun said?at a news conference on Oct 18.

In order to keep housing prices down, the government adopted a series of tightening measures earlier this year, such as instructing local governments to set new home price control targets, raising minimum down payments for second-home purchases, limiting purchases of new homes and introducing property taxes in the cities of Shanghai and Chongqing.

There are clearer signs of cooling in China's property sector, as a result of the central government's measures to deflate the property bubble.

More cities see slower property price increases

More cities reported a slowdown in year-on-year increases in property prices in September as a result of government's tightening efforts to cool the market, the NBS said.

In September, 59 cities out of the statistical pool of 70 major cities saw new home prices increase more slowly from a year earlier, compared with 40 cities in August, the NBS said in a report on its website.

Property prices in first-tier cities, including Beijing, Shanghai, Shenzhen and Guangzhou all stayed flat month-on-month for the third straight month, according to the report.

Chongqing, one of the two cities to impose property taxes this year - the other being Shanghai - posted the steepest decline as prices dropped 0.4 percent from August. Changsha, Kunming, Yinchuan and Luoyang had the largest gain, 0.3 percent, according to the NBS.

Property prices are gradually heading downwards amid cumulative government control efforts.

As one market-cooling measure, the government has restricted residents in 43 major cities from buying second or third homes, resulting in a decline in property transaction volume in many of these cities.

Raised mortgage rates for first-time buyers

Government control measures will yield far better results in first-tier cities than in second- and third-tier cities. Meanwhile, tightening property loans by banks in second- and third-tier cities has spread to big cities, which will further reduce buying demands.

China Construction Bank Corp, China's biggest mortgage lender by assets, raised rates for first homes in Beijing to 1.05 times the central bank's benchmark lending rate, Xinhua News Agency reported on Oct 13. It used to offer first-home buyers 30 percent off the benchmark rate. China Everbright Co raised its rate in Shanghai to the same level, according to Economic Information Daily.

The Legal Evening News reported that banks in 14 cities, including Guangzhou, Shenzhen and Shanghai, have raised mortgage rates for first-time buyers by 5 percent to 30 percent. In Changchun, Jilin province, some banks raised their rate by up to 50 percent, according to the newspaper.

Recent interest rate hikes by some commercial banks on mortgages for first homes will definitely lower demand among home buyers and therefore raise pressure on developers for larger price cuts, analysts said.

The higher mortgage rates will reduce already low trading volume and force developers to further cut prices to keep their businesses running.

Meanwhile, cash-strapped property developers are facing increasing financing difficulties and piling inventories pressures.

Current government control should continue

China's housing market started correcting, but the central government wouldn't want to stop tightening just yet.

Results of a recent stress test show that commercial lenders in China can take as much as a 40 percent decline in property prices, and the general risk in property loans is controllable, said Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC).

The MOF said the slower growth in fiscal revenue followed a slight downturn in the economy and ongoing monetary tightening policies designed to cool down the property market.

"The rapid rise in property prices has been markedly contained, but we'll still need to consolidate the result and closely monitor the market," NBS spokesman Sheng Laiyun said?at a news conference in Beijing.

"We will not relinquish control as the property sector serves as a pillar industry to the nation's economic development, and will continue to monitor the sector's changes to further consolidate the results of macro control," Sheng noted.