THE inventories of new homes in 20 major Chinese cities jumped nearly 29 percent year on year in the third quarter of this year even as sales plunged, a latest industry research has found.

The inventory levels increased substantially by an annual 28.8 percent in the 20 cities between July and September, according to a joint report released yesterday by independent property consultants Knight Frank and Beijing Holdways Information and Technology Co, which have been tracking 35 cities across the country.

Sales of new residential properties fell 17.3 percent year on year during the three months, a traditional high season for home transactions, after potential buyers decided to wait and see as the government's austerity measures, including restrictions on home purchases and tighter mortgage policies, remained.

In Shanghai, the stocks of new homes jumped 35.6 percent in the third quarter from a year earlier to 8.8 million square meters while sales tumbled 21.8 percent to 1.91 million square meters.

In the 20 cities, new home prices added 1.1 percent on a quarterly basis amid a quiet market and the government's stringent monetary policies, the report said.

"We believe the funding pressure would force more developers to reduce prices of their developments in the fourth quarter as they strive to generate cash," said Thomas Lam Ho Man, head of research for Knight Frank's China operations. "Since the rise in home prices has come under control, the government is unlikely to launch new tightening measures although the current policies may not be relaxed in 2012."