* Shanghai rebar ends well off session peak
* Dalian iron ore tracked steel's rise, but also off day's high
* China curbs may cool steel demand from property market -analyst (Updates prices)
By Manolo Serapio Jr
MANILA, June 16 (Reuters) - Chinese steel futures rose for a third day in a row on Friday but gave up bulk of the day's gains as the outlook for demand in the world's top steel consumer may not be too promising, particularly from its property sector.
Shanghai rebar steel futures rose as much as 2.5 percent amid government efforts to tackle a glut, but pared gains to less than half a percent at the close.
China said on Thursday that it had cut 42.4 million tonnes of steel capacity by end-May, representing 85 percent of its capacity reduction target this year, and sent rebar futures nearly 4 percent higher that day.
On Friday, the most-active rebar on the Shanghai Futures Exchange closed up 0.4 percent at 3,091 yuan ($454) a tonne.
The construction steel product gained 4 percent this week, its biggest weekly increase in a month.
But Julius Baer analyst Carsten Menke said the outlook for steel demand from China's property sector is "not very promising" with state efforts to cool the market likely to reduce activity over the coming months.
China has been restricting real estate purchases across its cities to keep speculation in check and curb soaring prices, with banks also tightening loans to the sector.
"Adding to this, steel consumption is approaching the seasonal peak, which should lead to falling production over the coming months and weigh on the steel mills' demand for iron ore," Menke wrote in a note.
Firmer steel prices helped lift raw material iron ore, with the most-traded iron ore contract on the Dalian Commodity Exchange closing 0.8 percent higher at 426.50 yuan per tonne. That was below its peak of 436 yuan for the day.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose 1.5 percent to $55.23 a tonne on Thursday, according to Metal Bulletin.
The spot benchmark, which hit a one-year low on Tuesday, has gained 1.5 percent this week, following a three-week decline.
Menke said rising low-cost supply from top exporters Australia and Brazil should keep the iron ore market "in oversupply and prices should continue to slide over the coming months."
"As prices have returned to fundamentally justified levels faster than expected, we lower our 3- and 12-month targets to $55 and $50 per tonne. We maintain a cautious view on both iron ore and steel." ($1 = 6.8126 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Richard Pullin and Subhranshu Sahu)