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CHINA’S home prices fell again in June, underscoring the challenge for policymakers to halt the property market slump that’s hurting developers and the economy. 

New-home prices in 70 cities, excluding state-subsidised housing, dropped 0.67 per cent from May, when they slid 0.71 per cent, the most since October 2014, National Bureau of Statistics figures showed on Monday. Values of existing homes declined 0.85 per cent, compared with a 1 per cent decrease a month earlier. 

The figures add to evidence that a rescue package unveiled in May has done little to boost sentiment in the real estate market. Yet few expect more aggressive measures to emerge from a key five-year meeting of Chinese Communist Party officials starting on Monday. Pressure on prices is likely to remain as developers and homeowners resort to deep discounts to offload homes.

“Fears of catching a falling knife could deter property investment,” Bloomberg Intelligence analysts Kristy Hung and Monica Si wrote in a recent note. “Excessive inventory of new and existing homes added pressure for further price drops.”

Price declines deepened from a year earlier. New-home prices slid 4.9 per cent on average and used-home values tumbled 7.9 per cent, the statistics bureau said. 

The property sector continued to weigh on China’s economy last quarter. Gross domestic product expanded 4.7 per cent from a year earlier, missing the median estimate of 5.1 per cent in a Bloomberg survey of economists. Real estate investment shrank 10.1 per cent in the first half, the same pace as in the first five months, separate government data showed on Monday. 

“Recent supports are a step in the right direction but are still dwarfed by the scale of the problem,” said Harry Murphy Cruise, an economist at Moody’s Analytics. “Real estate’s tentacles run deep. When the sector hurts, pain is felt economy-wide.”

One bright sign was an improvement in residential property sales, which narrowed declines to 13 per cent in June from a year earlier, according to Bloomberg calculations based on figures for the first six months. That compares with a 28 per cent year-on-year drop in May. 

China introduced a broad real estate policy package in May, centered on relaxing mortgage rules and encouraging local governments to buy unsold homes. All four of the nation’s biggest cities — Beijing, Shanghai, Shenzhen and Guangzhou — have since rolled out major easing measures for homebuyers. 

Investors and analysts are skeptical that the steps will be sufficient due to the limited central bank funding revealed so far and the slow progress of existing trial programs in several cities. 

Property polices are a key area of focus during the Third Plenum this week, one of the most important political meetings of the Chinese Communist Party. China has the firepower to end its housing crisis, including with a “big-bang solution” that involves pumping money like the Federal Reserve, but it’s unlikely to pull the trigger, according to Bloomberg Economics. 

For now, investors are yet to be convinced that the housing slump has reached a turning point. 

A Bloomberg Intelligence gauge of Chinese real estate stocks fell 1.5 per cent on Monday morning, extending declines to 27 per cent from a mid-May high. 

Developer China Vanke last week warned of a loss of as much as 9 billion yuan (S$1.61 billion) in the first half, as discounts and high land acquisition costs hurt margins. The state-backed company is trying to avoid following the likes of China Evergrande Group and Country Garden Holdings Co. into default. 

Funding for developers has stayed weak even after the government drew up a “white list” late last year of property firms that are eligible for loans. A broad gauge of financing for builders, including loans, bonds and proceeds from home sales, shrank 23 per cent from a year earlier, separate data showed Monday. 

While slightly more cities saw new-home prices rise from a month earlier, the first such improvement in three months, the recovery has been skewed to bigger cities and second-hand homes, BI’s Hung said on Bloomberg Television. 

There are hurdles to a recovery as long as people remain insecure about their jobs and pessimistic about prices, Hung said. “People are still asking where the bottom is for home prices to get in the game and buy a property.” BLOOMBERG