(MENAFN) China’s housing market is losing momentum, with prices retreating across major urban centers and investment activity continuing to weaken, amplifying fears over the stability of the world’s second-largest economy.

Fresh data from the National Bureau of Statistics shows that prices for both new and existing homes declined across most of the country’s 70 major and mid-sized cities. First-tier hubs — Beijing, Shanghai, Guangzhou and Shenzhen — registered a 0.8% average drop, while 31 large second-tier cities saw prices fall 2%, and 35 mid-sized cities recorded a steeper 3.4% decline.

Shanghai stood out as a rare bright spot: China’s largest city posted a 5.7% annual increase in new-home prices. Yet the broader trend remained negative, with previously owned homes sliding 4.4% year-on-year in first-tier cities, 5.2% in second-tier markets, and 5.7% in third-tier locations.

Beijing has rolled out a series of measures — including lower mortgage rates and reduced down-payment requirements — to revive demand. Local authorities have also adopted targeted policies to spur buying. So far, however, these steps have not reversed the market’s downward trajectory.

The malaise rippling through real estate is striking other core industries such as steel and cement, underscoring the heavy dependence of China’s economic and social framework on property development. Globally, the sector remains a vital engine for growth, feeding construction activity, investment flows, and mortgage lending.

Housing debt represents one of the largest exposures on bank balance sheets worldwide, meaning a prolonged downturn or a sharp correction could trigger serious financial shocks.

Excessive post-crisis expansion drives today’s pressures
Asian markets analyst Said Kaymaz, speaking to media, traced the roots of the current strain to rapid urban real-estate expansion that began in the 1990s. He noted that China’s massive fiscal and monetary stimulus following the 2008 global financial crisis continues to shape policymakers’ views.

“Housing construction firms launched new projects to compete against each other due to the vitality in the market, as the prices were up — they recklessly borrowed and used large amounts of leverage while doing so, however,” he said.

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