BEIJING (Reuters) - China's new home prices accelerated at their fastest pace in almost two years in July, led by smaller cities and highlighting challenges policymakers face in stimulating a slowing economy without fueling a property bubble.

Average new home prices in China's 70 major cities rose 1.1 percent in July from a month earlier, according to Reuters calculations based on an official survey on Wednesday, the fastest pace since October 2016 and up from the previous month's reading of 1 percent.

Outside the recent boom periods of 2016 and early 2013, monthly price gains of more than 1 percent have been rare in China's official home price data.

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The July increase also marks the 39th straight month of gains, Reuters calculations showed, despite tougher curbs designed to rein in a more-than-two-year real estate boom.

The 35 tier-3 cities in the survey led the price rally in the month while price growth in China's four largest cities of Beijing, Shanghai, Shenzhen and Guangzhou, and the 31 tier-2 cities -- which comprise sizeable provincial capitals -- was more subdued.

The market's surprising resilience also partly reflects the prevalence of buyers skirting existing restrictions on purchases. China said in late June that it would renew a crackdown on property irregularities in 30 major cities this year, prompting several local governments to ban corporate entities from buying residential properties.

"It is not a good time to relax existing curbs now and policymakers should continue to step up property controls," Zhang Yiping, an analyst with China Merchants Securities said after Wednesday's data release.

The majority of the 70 cities surveyed by the National Bureau of Statistics (NBS) still reported monthly price increases for new homes. 65 cities reported higher prices in July, up from 63 in June.

Yang Yewei, an analyst at Southwest Securities, said declining housing inventory combined with still robust demand has exacerbated a housing supply shortage.

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Compared with a year earlier, new home prices rose 5.8 percent, the fastest pace since September 2017 and quickening from June's 5 percent gain.

Analysts say a spill-over effect from Beijing's efforts to step up credit support to smaller firms in the economy may have buoyed demand and quickened sales in the real estate sector.

Despite Beijing's determination to maintain property curbs, funding appears to be easing for property developers as Beijing pumps more credit into the economy to cushion the impact of a tit-for-tat trade war with the United States.

China's property investment growth sped up to its quickest pace in nearly two years in July, data showed on Tuesday, with year-on-year sales growth more than doubling from the previous month.

The resort city of Sanya, a tier-3 city in the island province of Hainan, was the top price performer in the month, rising 3.7 percent on-month, NBS data showed.

Tier-3 cities collectively posted a robust month-on-month price increase of 1.5 percent for new homes, the NBS said in a statement accompanying the data on Wednesday. That was more than double their 0.7 percent price gain in June.

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Figures from the latest central bank monetary policy implementation report last Friday showed that the weighted average lending rate for individual home buyers rose 18 basis points in the second quarter, versus a 16 basis point rise in the previous quarter.  

However, Southwest Securities' Yang said while China's mortgage lending rates have gradually risen, credit remains easily accessible in smaller cities.

(Reporting by Yawen Chen and Ryan Woo; Additional Reporting by Cheng Fang; Editing by Sam Holmes)