China home prices fall faster in May as property slump deepens

China’s housing downturn showed no clear end in May, even as the country’s biggest cities managed a small gain. New-home prices fell 0.2% from the previous month, faster than April’s 0.1% drop, while prices were still down 3.5% from a year earlier, underscoring how hard it has been for policymakers to engineer a durable rebound.

That matters well beyond China’s property sector. Real estate once accounted for roughly a quarter of the economy at its peak, and a prolonged slide keeps weighing on household wealth, consumer confidence and the flow of bank lending. For global markets, the danger is that a weak Chinese housing cycle suppresses demand for imported goods, strains developer balance sheets and leaves investors exposed to a slow-moving drag on growth.

The latest figures also showed how uneven the market remains. Prices in first-tier cities, Beijing, Shanghai, Guangzhou and Shenzhen, rose 0.2% in May after a 0.1% increase in April, with Shanghai, Shenzhen and Guangzhou all posting gains. Resale prices in the biggest cities improved for a third straight month, a sign that the top end of the market may be stabilizing. But smaller tier-three cities continued to record declines, showing that local demand and policy support still vary sharply across the country.

The broader sector, however, is still contracting. In the January-April period, real estate development investment fell 13.7% from a year earlier to 2.3969 trillion yuan. Sales of newly built commercial buildings dropped 10.2% by floor space and 14.6% by value, while funds for property development enterprises fell 18.4%. New construction starts sank 22.0%, and residential construction starts fell 23.6%. Individual mortgage loans tied to real estate development financing dropped 31.7%, while domestic loans declined 25.9%.

Local governments have stepped up buyer incentives and subsidy programs in an effort to steady demand, but analysts have warned that the market may still need months to find a floor. Morningstar analyst Jeff Zhang said, “The property market has not yet bottomed out,” adding that oversupply could mean one to two more years before a broader recovery.

For China, the stakes reach far beyond apartment prices. Weak housing hits developer revenues, local government finances and bank lending at the same time, turning the property slump into a broader test of economic resilience. For U.S. investors and exporters, the message is equally clear: China’s housing weakness is still a global warning signal, not a local problem.