Shanghai's city government became the second in two months to allow more luxury properties into the market, real estate agents and developers said, signalling some cities in China are easing restrictive policies that aimed to cool an overheated market.

City officials in Beijing had earlier approved seven projects in June selling at prices above a cap set last November, which made developers less interested in bidding for expensive land in the city, media reported on Monday.

Any move to drive up home prices in China, which are already near record levels, can be controversial. The central government prefers that local authorities help curb property speculation because it fears unaffordable housing could cause social unrest.

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Keeping the lid on housing prices

A project developed by Shenzhen Overseas Chinese Town Co Ltd in central Shanghai recently gained selling approval to set prices close to 300,000 yuan ($48,400) per square meter, a record in the financial centre, according to online marketplace SouFun.

"We have seen new projects setting prices above 100,000 yuan in the past few months," said Thomas Lam, senior director at realtor Knight Frank. "It's a signal that the government is not implementing the administrative measures as strictly as it once did. It knows there's still a demand for luxury housing."

Developers also said it is much easier to get pre-sale approval and sell to buyers who are switching homes.

"We are allowed to raise prices...there's no formal documents about it, but we're told verbally. We all know it's been relaxed," said a developer who declined to be named because of the sensitivity of the matter.

He said the company raised some development prices to match increased market prices in the city.

Knight Frank's Lam said a curb on luxury properties would discourage developers from buying land at prices at record levels, especially in the centre of top-tier cities. Land sales are the major revenue for most local governments in China.

Some local governments are also allowing people to buy more than one home, which earlier had been prohibited. The northern city of Hohhot in the Inner Mongolia region was the first city to openly relax housing restrictions.

Some Chinese cities have also tried to limit property price cuts to 15-20 percent from the original asking price, developers and real estate agents said in May, in a bid to slow a steeper industry downturn and boost confidence in the market.

More developments in China are offering discounts of more than 20 percent, property research company CRIC said in a report, and a development in the northeastern port city of Dalian slashed prices by 39 percent last week.