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By Greg Morcroft - China said on Wednesday that the nation’s home prices fell for the first time in two years in May, slipping 0.2 percent and adding to fears that the sector may cause a broader economic pullback.
The data is just the latest indication of an economic slump concentrated in the housing and construction centers. Last week, China reported slowing property investment, and big declines in property sales and new construction.
Real estate accounts for about 15 percent of China’s economic output, according to the New York Times.
As China’s real estate market remains healthy in top-tier cities like Beijing and Shanghai, the collapse has hit many of the nation’s tier 3 and 4 cities and other areas that have prematurely pushed for urbanization. Permanent reminders are seen in various half-built extravagant structures and abandoned large scale projects in some of the most rural areas.
In a research note released after Wednesday’s data, UBS Bank economist Wang Tao told clients that, “The risk of a more persistent and sharper downturn in the property sector is now the biggest risk facing China’s economy in 2014 and 2015.”
Last month China’s Southwestern University of Finance and Economics research showed that the nation's home vacancy rate was 22.4 percent last year, up from 20.6 percent in 2011.
Both analysts and investors are concerned about uninhabited apartments in so many Chinese cities, a result of the authorities’ desire for fast growth fueled by easy credit. In the past few years the home market has been a popular investment, but lately prices have stagnated as China’s authorities allowed investment in other sectors.