Property prices in 70 major cities increased by 0.2 percent year-on-year, the National Development and Reform Commission and the National Bureau of Statistics said in a statement, following a 0.6-percent fall in May.

Chinese property prices fell 0.4 percent in December from a year earlier as demand was battered by the global financial crisis. It was the first decline since the economic planning agency started publishing the figure in mid-2005.

Since October, the government has taken a series of measures, including tax breaks and preferential rates for first-home buyers, to avoid a crash in real estate, which accounts for more than 20 percent of urban fixed investments.

The property market started to stabilise in March, when prices rose 0.1 percent month-on-month, and June marked the fourth month in a row that prices increased.

In addition to favourable government policies, inflation expectations due to a surge in new bank loans this year is also driving the sector's rebound, analysts argued.

New loans for the first half of the year amounted to 1.1 trillion dollars, Chinese media said this week, citing central bank figures, after monthly new credit growth lingered at record highs over the period.

"China's residential market has touched its rock bottom and is recovering, however, at a pace faster than reasonably expected," Alan Chiang, head of residential of DTZ China in Shanghai, told AFP.

"I would expect that bank lending shall be further tightened and mortgage interest rates shall rise."

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