By Liangping Gao and Joe Cash

BEIJING (Reuters) - Beijing and Shanghai have announced tax breaks to spur home purchases as distress in the property sector continues to drag on growth in the world's second-largest economy.

Other major Chinese cities are widely expected to follow suit and the measures come on the heels of some tax breaks on home and land transactions unveiled by China's finance ministry last week.

Beijing and Shanghai residents looking to sell an existing property will be exempt from paying the value-added tax so long as they have held onto it for more than two years, statements from local authorities said on Monday.

The two megacities also raised the standard for levying deed tax to properties larger than 140 square metres (1,500 square feet), up from 90.

Chinese policymakers urgently need to arrest a slump in the property market, once a key growth driver that at its peak accounted for around a quarter of economic activity. But a broader consumer and investor confidence crisis has glued prospective buyers' wallets shut.

The steps by Beijing and Shanghai have done little to boost property stocks. China's real estate share index has lost about 1% so far this week while an index for Hong Kong-listed mainland property developers is roughly flat.

The new measures this month come on top of a raft of rule changes for the property sector at the end of September, including a cut in the minimum down payment ratio to 15% for all housing categories and a relaxation in home purchase restrictions.

"The policy pivot since September has been effective in reviving demand and supporting housing and stock prices," said Xu Tianchen, senior economist at the Economist Intelligence Unit. "However, China's economy is not yet on a firm footing, and policy support has to be bold and sustained to revive confidence."

Zhang Dawei, an analyst at property agency Centaline, said confidence in near-term prospects for the country's real estate markets had improved.

"The property market in some cities, especially tier-one and tier-two cities, can be judged to have bottomed out, and the property market stabilisation will be the trend," Zhang added.

Analysts also said, however, that officials will need to roll out further policy support to tackle the wider stresses dragging on consumer confidence.

"To reignite the growth engine of the property sector, policymakers must address residents' expectations regarding economic and income growth, and offer a more stable outlook on housing prices," said Bruce Pang, chief economist at JLL, a property consultancy company.

Other tax breaks announced by both Beijing and Shanghai include eliminating the distinction between so-called "ordinary" and "non-ordinary" housing when value-added taxes are levied on property sales. Shanghai will also eliminate the distinction when it levies personal income taxes on property sales.

"Non-ordinary" housing consists of properties of 144 square metres or larger which had previously been subject to higher taxes.

($1 = 7.2366 Chinese yuan)

(Reporting by Joe Cash and Liangping Gao, Editing by William Maclean and Edwina Gibbs)