CHINESE home prices rose for a second month in a row in June, indicating that government efforts to boost the struggling property sector have started to gain traction.

Average new-home prices rose 0.4 percent in June from May, according to Reuters calculations from official data published Saturday. That was a faster gain than the 0.2 percent rise in May, the first monthly increase since April 2014.

The second month of rising prices is a sign of bottoming out for one of the country’s key sectors and should ease fears of a sharp slowdown in China’s economy.

On Wednesday, China reported annual growth of 7 percent in the second quarter of this year.

A mild recovery in the market could be welcomed by the government as long as it does not turn into a swift rebound, which would risk rekindling a property bubble.

Sheng Laiyun, spokesman of the National Bureau of Statistics (NBS), said Wednesday the property sector had shown marked improvement in the second quarter, boding well for the broad economy.

Still, high inventories of unsold homes have weighed in most small cities and developers have slowed the pace of construction, underscoring the unlikeliness of a quick recovery in the property market this year.

“There are many Chinese cities sitting on a sizeable inventory of unsold homes. It’s not easy for home prices to be up in those cities,” said Liu Yuan, head of research at property consultant Centaline in Shanghai.

Official data last week showed China’s unsold floor space totaled 657.4 million square meters at the end of June, up 20.8 percent from the same period a year ago.

The government in the past few months has relaxed tax rules and cut down payments for second-home buyers.

The government’s pro-growth policy, which included four cuts to benchmark interest rates since November, also helped boost property sales and change market sentiment.

With sales rebounding and homebuyers turning more optimistic about the market, some developers have started to raise prices.

An executive at property company CIFI said this month it was planning to raise prices by 10 percent in the second half while Country Garden said last week it saw room to lift prices for some projects.

The NBS data showed home prices fell 4.9 percent in June on an annual basis, the 10th consecutive annual fall, but at a slower pace than the 5.7 percent dip in May.

Across China, home prices rose month on month in 27 of the 70 major cities monitored, up from 20 in May, NBS data showed.

Prices in the wealthiest cities lead the gains with most third-tier cities still seeing prices falling, highlighting a growing divide in the market.

“There are relatively strong housing demand and transactions in the first-tier cities, where home price gains are much higher than that in second- and third-tier cities,” Liu Jianwei, a senior statistician at the NBS, said in a statement accompanying the data.

Shenzhen was the top performer, recording a third consecutive month of rebounds, up 15.7 percent in June from a year ago following a 7.5 percent rise in May.

Shanghai’s prices also swung into positive year-on-year growth, rising 0.3 percent in June and reversing a drop of 2.3 percent in May.

(SD-Agencies)