China's new home prices increased in July for the third straight month, a survey showed Friday, as the market continued to recover on the back of government policy support.

The average price of a new home in China's 100 major cities rose 0.54 percent month-on-month to 10,685 yuan ($1,721) per square metre, the China Index Academy (CIA) said in a report.

The result, however, marked a slight deceleration from a 0.56 percent gain in June.

The average price had edged up 0.5 percent in May, the first increase in four months.

Prices fell for eight consecutive months through December last year before rising in January.

The streak of gains comes as authorities have taken steps to support the property market, a key sector for the world's second-largest economy.

Land sales to developers are also a major source of revenue for cash-strapped local governments.

The central People's Bank of China (PBoC) in June announced its latest cut in benchmark interest rates, the fourth such move since November, and has taken other steps such as easing mortgage policies.

In late March the PBoC lowered minimum down payment levels on second homes nationwide, rolling back a four-year-old policy implemented to rein in soaring prices that were making homes too expensive for many buyers and raising worries over social unrest.

The central bank also shortened the ownership period during which sellers are liable for a 20-percent capital gains tax on properties other than their main home.

Looking ahead, CIA said it expects "confidence in the real-estate market to steadily increase as stabilisation policies are aggressively implemented and the market continues to warm back up".

China's economy expanded 7.4 percent last year, the weakest pace since 1990, and slowed further to 7.0 percent in each of the first two quarters this year.

On a year-on-year basis new home prices fell 1.38 percent in July, improving sharply from a decline of 2.70 percent in June, according to the CIA figures.

The average price in China's top 10 cities was 19,580 yuan per square metre, up 1.30 percent from a year earlier -- rebounding from a fall of 0.82 percent in June.