China's home prices in May down slightly from previous month, adding to fresh signs of cooling in a property market that has been a persistent drag on the broader economy in recent months

Allison Oesterle

BEIJING , June 1, 2014 (Thomson Reuters Corp.) – China's home prices fell slightly in May from the previous month, two private surveys showed on Sunday, adding to fresh signs of cooling in a property market that has become a persistent drag on the broader economy in recent months.

Prices of new homes in 288 cities fell 0.03 percent in May from April, marking the second month-on-month drop in a row, a poll by real estate services firm E-House China Holdings Ltd showed.

Compared to the same period a year ago, home prices rose 5.8 percent in May, easing from a rise of 6.9 percent in April and marking the seventh consecutive month of slowing annual property inflation.

A separate survey by China Real Estate Index System(CREIS) showed average prices in the 100 biggest cities fell 0.32 percent in May from April, snapping a 23-month-long streak of monthly rise.

Meanwhile, home prices still rose 7.8 percent in May from a year ago, moderating from a 9.1 percent gain in April, CREIS said.

"The property market has entered a stage of price correction after rising for nearly two years," said CREIS, a consultancy linked to China's largest online property information firm, Soufun Holdings.

The real estate market has lost steam since late 2013 as authorities continued with its property tightening policies to rein in rapid price growth, a major source of public discontent.

Chinese property developers are starting to feel the pinch from slowing property sales and rising borrowing costs in recent months, with some smaller players reported funding difficulties or even cash flow problems over the past months.

The cooling real estate market also helped drag annual economic growth to an 18-month low of 7.4 percent in the first quarter and analysts said a sustained fall would risk China missing its economic growth target for the fist time in 15 years.

To avoid a sharp downturn in the property sector, a pillar that directly affects 40 other industries, the central bank ordered commercial banks to quicken mortgage lending and some local governments also started to act to lift home purchase restrictions.

Official figures showed home prices growth in China slowed to a near one-year low in April. The statistical bureau is due to publish official home price data for 70 major cities for May on June 18.

(Reporting by Aileen Wang)

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