New-home prices plummeted by more than 20 percent year-on-year in the capital city in May, and analysts said other cities will follow the trend in the second half of this year.

In Beijing, the average price of a newly constructed unit dropped to 23,467 yuan ($3,400) a square meter (sq m), a month-on-month decrease of 7.19 percent, and 21.06 percent lower than the same period last year, according to SouFun.com, the largest property website in China.

Prices fell partly because more developers offered discounts to counter the cooling effect of the government's tightening property policies.

Of the 17 Beijing developments new to the market, 12 saw a dip in price. In some projects, the average price dropped by as much as 3,000 yuan to 4,000 yuan/sqm.

In February, the Beijing municipality rolled out a set of 15 measures, including purchasing restrictions for migrant residents and higher downpayments for second-home purchases, in a bid to further cool the property market.

Those policies are expected to rein in the city's housing transactions by 50 percent this year, according to real estate agency Centaline Property Agency Ltd.

Industry analysts said the property market will also show signs of cooling in other Chinese cities this year.

Nie Meisheng, chairman of China Commercial Real Estate Commission, said in late May that China's housing prices will drop by around 10 percent this year as the government has made curbing inflation its top policy priority.

A recent report from Standard Chartered Plc showed that new-apartment sales in April in China's 38 tracked cities, including Beijing, Shanghai and Guangzhou, fell by 14 percent month-on-month.

The 38 cities' transaction volume in the primary market was half that of the same month of 2010.

"The supply of new apartments is already expanding and will reach a historical high in the next few months. However, the demand still looks weak," said Stephen Green, head of Greater China research at Standard Chartered Plc.

At the end of May, Beijing had an inventory of 101,291 apartments, a five-month high, according to data from Beijing Real Estate Trade Management website, an online platform managed by the government.

Green predicted that the inventories of new houses might peak in the fourth quarter of this year. "The rising inventories may push developers to cut prices," he said.