Although an easing in the credit environment wasn't meant to inject vigor into the property market, speculation has been raised on lower loan costs for buyers, and easier financing available for developers as a result.

"An interest rate cut at last - let's run around spreading the news," Pan Shiyi, chairman of Soho China Ltd, said on his micro blog soon after the People's Bank of China announced the lowering of interest rates by 25 basis points.

Following the cut, the Ministry of Housing and Urban-Rural Development on Friday also cut the rate for provident fund loans by the same amount.

"The news is without a doubt bullish for the property market," said Yang Hongxu, an analyst with the Shanghai-based E-house China Research and Development Institute.

For the capital-intensive housing sector, lower interest rates also mean reductions in finance costs for developers, Yang said.

"Although the banks' lending for property development remains stringent, borrowing from other channels such as private funding is becoming easier."

Besides, lower personal loans cost will release more "inelastic demand" to the market, he added.

The rate adjustment means that a 1-million-yuan ($157,000) housing loan with 20-year payback period on benchmark interest rate will cost 150 yuan ($23.6) less a month.

"Apart from the need for somewhere to live, a major factor influencing someone's decision to buy property is the expectation of how prices will react in future," said Zhang Dawei, an analyst with Centaline Beijing.

A change like this in the credit policy will give a great psychological boost to the market, and be far stronger than just the costs it saves every month, added Zhang.

As the economy showed the signs of cooling in the first half of the year, local authorities have increasingly fine-tuned local rules to stimulate demand.

Trading volume in Beijing and Guangzhou reached the highest level in May since housing regulations were introduced in 2010.

"Unless stricter regulations are introduced by the central government, trading volume in the property market will continue to rise in the next two months," said Lin Qian, vice-president of the real estate agent Homelink.

However, if the restrictive measures remain, analysts said housing prices may not repeat the sharp rebound seen in the second half of 2009.

"This round of easing isn't as strong as the previous ones," Yang said.

The central bank cut interest rates five consecutive times from September to December 2008, the fourth of which lowered the rate 108 basis points in a single swipe.

Yang said the central government's stance hasn't changed, and house prices may not pick up before the fourth quarter.

Shi Hongrui, chief manager of Shanghai-based Hanyu Property, welcomed the interest rate cut but remained cautious of its overall effect.

"For ordinary home buyers, the decision to make a purchase is still dependent on whether houses price are back to a reasonable level, thus a little sweetener in loan rates may not be enough," Shi said.

According to E-house China R&D Institute, the first five months of this year have seen China's land sale revenues in 10 major cities fall to their lowest level in almost three years, despite a rebound in the property market.

Land sale revenue in the 10 cities was 92.2 billion yuan in the first five months, down 58.41 percent year-on-year, while sales of commercial residential buildings in the cities reached a 16-month high.

Contact the writers at weitian@chinadaily.com.cn and lijiabao@chinadaily.com.cn