China's property market is showing signs it's coming back to earth as prices dropped in more Chinese cities in December amid the country's persistent tightening efforts.

In December, 52 cities out of the statistical pool of 70 major cities saw drops in new home prices from November, compared with 49 cities the previous month, the National Bureau of Statistics (NBS) said on Wednesday.

New home prices in 16 cities stayed flat last month from November, while only two cities reported price hikes, which were all below 0.1 percent, according to a statement posted on the NBS website.

On a year-on-year basis, nine cities out of the 70 saw new home price declines in December, up from four in November. Growth of new home prices eased in 55 cities, the NBS said.

Meanwhile, prices of resold homes fell in 51 cities from November to December, while 29 cities saw drops in resold home prices from a year earlier, an increase of eight cities from November, it added.

"The government's control of the property market has achieved marked results, which can be seen from the fact that both speculative and investment demands have been effectively curbed," said Ma Jiantang, chief of the NBS.

FURTHER PRICE CUTS

Property developers will make further price cuts as they struggle with increasing inventories, worsening capital flows and waning transaction volumes caused by consumers' wait-and-see attitude in 2012, said Dong Jichang, a professor with the Center for Forecasting Science of the Chinese Academy of Science.

Since 2010, the country has imposed a raft of measures to dampen property prices. Those measures include tighter credit supply, higher down payments, a ban on third-home purchases, a property tax in some cities and the construction of low-income housing.

Sales pressure has increased as housing inventory has continued to pile up. NBS figures showed that a total of 271.94 million square meters of commercial housing were up for sale in 2011, an increase of 26.1 percent year-on-year. The figure was 18 percentage points up from the previous year.

About 12 of 20 listed Chinese property developers, including the nation's largest developer by market value China Vanke, Shanghai-based Greenland Group and Beijing Capital Land, failed to meet their sales targets in 2011, according to the Centaline Property.

"Though some long-term factors, including increasing household income, rapid urbanization and rising land price, are likely to support house prices, market demand and policy controls will combine to further drag down their prices," said Dong, noting that the current tightening policies will not be eased.

"This year's transaction volume is very likely to continue the downward trend starting in the fourth quarter last year," said Zhang Dawei, a chief analyst with Centaline Property.

Dong said the average housing price in China will drop 5.3 percent year-on-year in 2012, while Qu Hongbin, HSBC China's chief economist, expected home prices to drop up to 30 percent in first-tier cities and more than 10 percent in second- and third-tier cities in 2012.

STILL ENGINE FOR GROWTH

As the country's property bubbles continue to deflate, some economists worry that the sector's slowdown will affect the country's economic growth.

NBS data showed that both investment and sales in the sector dropped sharply in 2011. The sector's investment rose 27.9 percent in 2011 from a year earlier to 6.17 trillion yuan (972 billion U.S. dollars), down 5.3 percentage points from the previous year.

Furthermore, sales of commercial housing rose 4.9 percent to 1.1 billion square meters in 2011, down from 10.6 percent in 2010.

"Although these indices retreated, they were still positive figures," Ma said, noting that investment in the property sector, which rose 20 percent even after deducting price factors, is still a growth engine for the economy.

"The construction of low-income housing will offset the effect of a slowdown in the construction of commercial housing," said Wang Tao, Chinese economist at UBS AG.

Qu held similar views, saying that the negative effects of the property price drops should not be exaggerated and these effects were still in a controllable range.

It is not only because the low-income housing will support the sector's investment, but also because the sector's leverage ratio is still low, Qu said, adding that housing prices were on course to return to a reasonable level.

To gear the property market back to the right track, China aims to build 36 million low-income housing units by 2015. The government said in early November that the country has met last year's goal of starting the construction of 10 million units by the end of October.