Chinese real estate slump to threaten recovery of economy

China’s property industry, the biggest downside risk to Chinese economy, extended its slump in May 2014 as sales and construction dropped and investment growth slowed, threatening to drag on a recovery in the world’s second-biggest economy.

National Bureau of Statistics data that home sales in the January to May period fell 9.2% from a year earlier by area, after an 8.6% decline in the first four months. New property construction dropped 18.6% this year through May and residential housing starts fell 21.6% by area.

According to previously released data, growth in real-estate investment slowed to 14.7% in the first five months from 16.4% in the January to April period, statistics bureau data yesterday showed. That was the weakest increase since a 12.5% gain in the first eight months of 2009.

According to statistics bureau figures, the decline in home purchases has been steeper in the more developed eastern regions of the country, where sales fell 14.4% by area in the first five months.

According to Societe Generale SA, the sinking real estate market may undermine Chinese Premier Mr Li Keqiang’s mini stimulus policies aimed at arresting a slowdown that’s thrown his 2014 growth target into question. Mr Yao Wei, China economist at Societe Generale in Hong Kong, said that “The housing downturn is still playing out and has shown no sign of turning around. The next few months will still be a tug of war between the housing sector and policy easing.”