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China July property investment slows, sales drop sharply

BEIJING (Reuters) - China's property market showed further signs of weakening in July, with real estate investment slowing and sales falling sharply despite efforts by many local governments to shore up the troubled sector.

Combined with July activity data released over the past week, the figures suggest softness in the housing market is becoming an increasingly drag on other parts of world's second-largest economy.

Property investment grew 13.7 percent in the first seven months from a year ago, down from an annual rise of 14.1 percent in the first half, the National Bureau of Statistics(NBS) said on Wednesday.

Newly started property construction dropped 12.8 percent in the January to July period from the same time a year ago, though the decline easing from an annual drop of 16.4 percent in the first six months.

Meanwhile, property sales dropped 16.3 percent in July in terms of floor space, according to Reuters calculations based on official data.

That compared with a 0.2 annual drop in June.

Property investment growth and newly started construction are expected to cool further in the coming months as developers slow their activities amid weak demand, analysts said.

"The surprisingly deep drop in home sales will continue to weigh on the property market," Zhao Dazhen, a property analyst at CEBM Group, an investment research firm in Shanghai.

"If the sales continue to worsen in coming months, we think the government will unveil more measures to support the industry," said Zhao.

A growing number of local governments have eased restrictions on property purchases in recent week, while state-controlled banks have also revved up lending to the sector, though some analysts believe banks are increasingly reluctant to lend to some developers as the downturn persists.

At least 30 regional governments, which earn a large chunk of their revenues by selling state land, have openly or quietly relaxed home purchase restrictions this year, according to data from CRIC, a unit of real estate services firm E-House China EJ.N.

Analysts said the unwinding of property controls would lend some support to the market in coming months but a greater concern would be whether authorities made credit more readily available to borrowers.

The NBS data showed mortgage loans fell 3.7 percent in the first seven months of 2014, unchanged from the first half.

A tighter financial environment is considered one of reasons for the cooling property market as Chinese banks have become more cautious on extending property-related loans this year.

Local authorities in southern Fujian Province earlier this month urged banks to increase loans to developers and home buyers, while the western Sichuan Province has started to provide fiscal subsidies to banks which offer cheap mortgage loans to first home buyers.

(Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Kim Coghill)