Wenzhou in Zhejiang province has quietly loosened purchase restrictions in the housing market by permitting both local residents and non-local households to buy second homes, sources said.

In an internal document acquired by a source who asked to remain unnamed the Wenzhou home regulator decided to slacken its former grip on home purchases.

Wenzhou was one of the nation's 46 cities that imposed restrictions on buying homes on the back of central government guidance issued in 2011. The municipal government published a regulation in March 2011 stipulating that all households could buy just one apartment subsequently, no matter whether they had homes or not before.

The requirement came in a bid to control the rapid increase in home prices in the city between 2009 and 2010, when prices of certain luxurious properties in the secondary market was hyped by investors to about 80,000 yuan ($12,968) per square meter.

However, the local housing regulator said there is no official notice on this change and added that there is no big change in the property market because they still strictly follow the original restriction issued by the central government.

"The slight adjustment we've made in the property restriction policy recently will allow local residents to own two apartments at the same time, which accords with the regulation issued by the central government in 2011," said a senior officer surnamed Hu from the Wenzhou City Commission of Housing and Urban-rural Development who declined to give his full name.

Hu added that it could not be seen as a loosening of property restrictions because the current policy in the city still strictly follows the original restricted scheme.

Song Huiyong, director of the research and consultation department at the property consultancy Shanghai Centaline, said the city is making a correction to its previous overplaying of the central government's policy.

"Compared with other cities' purchase restrictions, Wenzhou has apparently gone too far, and may hurt homebuyers who want to move to a bigger or better apartment," said Song.

Zhang Hongwei, research director of Shanghai-based property consultancy ToSpur, said the policy tweaking will help put a floor on local home prices, which have dipped by 30 to 40 percent from their peak, thereby eroding land revenues for the local government.

Yao Rulin, the general manager of Faith-trust Real Estate Development Co Ltd, which is running three residential projects in Wenzhou and a few commercial properties, fell victim to the city's declining home prices.

Yao bought one of the most expensive plots of land in the country in November 2010 for 3.7 billion yuan at 37,000 yuan per sq m by gross floor area.

The selling price of apartments in the project was expected to be at least 70,000 yuan per sq m in order for it to make a profit. However, the average price was set at 36,000 yuan when the project was eventually put on sale, at a time when the market was severely affected by restrictions on property ownership, said Yao.

The latest data released by the National Bureau of Statistics showed of all the 70 major cities the bureau tracks, only Wenzhou experienced a drop in new home prices in June from the same period last year, while 69 other cities all reported hikes.

Despite the downturn in the Wenzhou property market, expectations for a rising property market are growing in the nation's other major cities. Analysts said the central government's attitude toward the real estate market has shifted from "accentuating macro controls" to "establishing long-term effective mechanisms".

"Although the long-term policy has not been unveiled, the existing fiscal and taxation system, land policy, and financial mechanism will be reformed to create a healthy property market," added Zhang.