UPDATE 1-China May property sales fall at slower pace as policies buoy demand

* May property investment -7.8% y/y vs -10.1% y/y in April

* Sales by floor area -31.77% y/y vs -39.0% y/y in April (Adds details and background)

BEIJING, June 15 (Reuters) – China’s May property sales fell at a slower pace for the first time in three months, suggesting improved buyer sentiment in the sector after several easing measures taken by cities across the country to boost demand hit by COVID-19 curbs.

Property sales by floor area in May slumped 31.8% from a year earlier, narrowing from the 39.0% fall in April, according to Reuters calculations based on data released by the National Bureau of Statistics on Wednesday.

The market shows some positive developments despite the downward trend, said Fu Linghui, a spokesman at the statistics bureau, said at a news conference on Wednesday.

Shares of developers listed in mainland China surged, with the CSI 300 Real Estate Index up more than 5%.

Since the beginning of the year, around 200 cities took easing steps mainly targeting home buyers, including smaller down payments, subsidies and relaxation on purchases for household with more than one child.

The property sector, a pillar of growth for China, fell sharply last year and deteriorated further in recent months as the world’s second-biggest economy weakened. For January to May, property sales were down 23.6%.

“Although the rate of decline was lower compared to last month, the market remained sluggish,” partly due to COVID outbreaks, said Zhang Dawei, chief analyst at property agency Centaline.

Credit demand remains weak. Household loans, including mortgages, increased 288.8 billion yuan ($42.94 billion) in May from April, versus a rise of 623.2 billion yuan in the same period last year, central bank data showed.

To boost home purchases, China last month cut its benchmark rate for mortgages, one week after it lowered the mortgage rate floor for first-time home buyers.

China’s financial regulators pledged last month to keep credit growth stable in the property sector and help home buyers affected by COVID-19 outbreaks to defer their mortgage payments.

Financing conditions remained challenging for developers, which have been constrained by borrowing limits imposed by authorities in the summer of 2020 to curb a debt build-up in the sector.

Funds raised by developers last month fell 33.39%, narrowing from the 35.54% drop in April.

Property investment dropped 7.8%, narrowing from the 10.1% decline in April.

In May, new construction starts measured by floor area declined 41.85%, slowing from the 44.19% slump in April. ($1 = 6.7260 Chinese yuan renminbi) (Reporting by Liangping Gao, Ryan Woo and Kevin Yao; Editing by Tom Hogue and Raju Gopalakrishnan)

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