It's a process authorities hope for - stricter lending policies curb property sales, which in return translates into lackluster loan growth to lead a healthy growth of the real estate market.

Shanghai statistics show that new commodities housing sales dropped in the first half

on a year-on-year basis in terms of floor area as second-mortgage policies helped curb the property market.

Sales were down moderately nationwide but sharply lower in first-tier cities such as Shanghai and Beijing.

Sales of commodity property dropped 18.5 percent year on year to 12.29 million square meters in Shanghai, the Shanghai Statistics Bureau said last week.

New commodities residential housing sales slumped 22.4 percent to 10.70 million square meters in Shanghai.

"Banks in Shanghai strictly implement the central government's measures on property market by strengthening risks control," the Shanghai Bureau of the China Banking Regulatory Commission said. "The carry-on of the second-home mortgage policy curbed the speculative demand of real estate."

Meanwhile, new commodity house prices rose 9.7 percent year on year in Shanghai, with monthly prices growth dipping.

The outstanding value of total individual mortgage loans in Shanghai rose to 309.94 billion yuan (US$45.38 billion) as the end of June, up 2.9 percent from the beginning of the year.

Individual mortgages started to rebound in the second quarter after dropping for three straight months in the first quarter.

Second-hand mortgages have been a main driver for individual mortgage loan growth in Shanghai despite the fact that first-hand property trading is much heavier than that of second-hand ones.

Second-hand mortgages added 8.34 billion yuan in the first half, far more than the 300 million yuan of first-hand mortgages.

"Second-hand property transactions are mainly made in downtown areas with a heavy reliance on mortgages due to the high prices," the local regulator said. "While in a contrast, first-hand property transactions focused in the outer-ring area with less dependence on lending amid lower property prices."

Economists say China's property market adjustment is expected to continue into 2009.

"Restrictions on second-home mortgage loans introduced in late September 2007 have proved to be the most effective policy tool with an immediate impact on cooling down the property market," said Liao Qun, chief economist/strategist of China Banking of CITIC Ka Wah Bank.