BEIJING (REUTERS) - China's property downturn is expected to continue into the first half of next year, with home prices and sales falling as tight credit policies and a looming property tax dampen demand, a Reuters poll showed.

The property sector, a key driver of growth in the world's second-largest economy, has slowed sharply in recent months, with sentiment shaken by tight regulations and a growing liquidity crisis that has engulfed some of the country's largest and most indebted developers.

Forecasts for home prices and property investment were gloomier than the last poll in August.

Average home prices are estimated to fall 1 per cent in the first half of next year, according to 14 analysts and economists surveyed by Reuters from Nov 26 to Dec 1.

For this year, home prices are now expected to rise 2.6 per cent, down from a forecast of 3.5 per cent in the last poll and following a gain of around 4.9 per cent last year

"The downward trend in home prices has emerged" due to tight quotas on home loans, worries about a property tax and weak demand, said Huatai Securities analyst Chen Shen.

On the demand side, property sales by floor area are forecast to slump 16 per cent in the first half of next year, compared with a 27.7 per cent rise in the same period this year.

The expectation for the supply side is also gloomy, with property investment seen dropping 3 per cent in the first six months of next year, versus a 15 per cent rise in the first half of this year.

Rapidly deteriorating conditions in the property sector have prompted speculation that policymakers may start to dial back tough restrictions on buyers and developers and even cut interest rates if economic growth falters too sharply.

But most China watchers expect the authorities to largely stick to curbs for now, even as they fine-tune regulations, including marginal loosening of credit policies.

China Merchants Securities economist Zhao Ke said: "Cities will relax restrictions on purchases, sales, loans and curbs on lowering selling prices according to local conditions."

Policymakers recently made some tweaks to help genuine home buyers and some local authorities have moved to ease a financial crunch at developers.

Chengdu, in the south-west of China, last week issued a notice to ensure developers receive funds from presold properties and fresh loans.

Among the 14 interviewees, four expect pilot testing of a property tax to be expanded to some wealthy cities, such as Shanghai and Shenzhen, by the end of this year at the earliest, and eight think they will be introduced next year.

As for how a property tax would affect home prices? Most people think it depends on the tax rate, though it is expected to rein in soaring home prices in the short term.

"New homes may see a phased fall in prices and sales by volume" following the announcement of the list of cities implementing real estate tax testing, said Dr Huang Yu, vice-president of China Index Academy, a Beijing-based property research institute.

"That may increase supply and reduce speculative buying, piling downward pressures on home prices," Huatai Securities' Chen said.

Most agree that property will be more affordable over the next two and three years under Chinese President Xi Jinping's "common prosperity" campaign and the government slogan "houses (are) for living in, not for speculation".