The downtrend in prices of new houses in China continued in July, with the effort of local governments to relax regulations insufficient counter the tighter mortgage lending conditions in the country, Bloomberg reported.

The National Bureau of Statistics data showed that prices in 64 of 70 cities fell from June's levels, the most since January 2011 when the government changed its data compilation methods. Home sales fell by more than a quarter in July, the biggest monthly drop this year, the government reported earlier this month.

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In Beijing, prices slipped by a one percent, the first monthly decline since April 2012, the report noted. Shangha  and Guangzhou both recorded  the biggest slide in property prices in their since the data was gathered. The eastern city of Hangzhou and the southern tropical city of Sanya, meanwhile, had the steepest fall for July. Only the southeastern city of Xiamen and the southwestern city of Dali were the places where prices improved in July, the report showed.

Mizuho Securities Asia, Ltd. told Bloomberg that the local government's efforts to boost the market are not working as the high interest rate for home loans weighs on the sentiment of owner occupiers.

Local governments have joined the efforts to prime the property market in their areas, as the slowing development is affecting the entire economy.  Bloomberg cited industry analyst Property Agency Ltd. that 36 cities had loosened property regulations, while developers have been slashing prices since March. The latest data, however, shows these have yet to work.

The International Monetary Fund has said that China should reconsider efforts to prime the real estate industry. The rising debt levels in the country and increasing exposure of the financial industry to the real estate sector could present the economy with a "web of vulnerabilities" according to IMF, reported Bloomberg.

Standard Chartered is expecting conditions to further deteriorate based on its survey of 30 property developers in six cities. Although developers have offered discounts, buyers are still not biting the bank said.

Credit Suisse Group told Bloomberg it is uncertain where the housing market is headed in the next two months, but is hopeful the downturn has bottomed out as the government's measures kick in and demand picks up due to seasonality.

TagsChina home prices, China property market