By Liangping Gao and Kevin Yao

Beijing (Reuters)

China's new home prices fell at the fastest pace in over nine years in August, according to official data released on Saturday, as supportive measures failed to spur a meaningful recovery in the property sector.

New home prices were down 5.3% from a year earlier, the fastest pace since May 2015, compared to a 4.9% slide in July, based on Reuters calculations using National Bureau of Statistics (NBS) data.

In monthly terms, new home prices decreased for the fourteenth consecutive month, down 0.7%, matching the dip in July.

The property market continues to face challenges with deeply indebted developers, unfinished apartments, and declining buyer confidence, which are straining the financial system and jeopardizing the 5% economic growth target for the year.

A Reuters poll predicts that China's home prices will fall by 8.5% in 2024, and decline by 3.9% in 2025, as the sector struggles to stabilize.

China's property market is gradually bottoming out, with home buyers' demand, income, and confidence expected to take time to recover, according to Zhang Dawei, chief analyst at property agency Centaline. He stated, "The market is looking forward to a stronger policy."

Property investment fell 10.2% and home sales slumped 18.0% year-on-year in the first eight months, as per official data released on Saturday.

Chinese policymakers have intensified efforts to support the sector, including reducing mortgage rates and lowering home buying costs, partly revitalizing demand in major cities.

Smaller cities, facing fewer home purchase restrictions and high levels of unsold inventory, are particularly vulnerable, presenting challenges for authorities to balance demand and supply across various regions.

Of the 70 cities surveyed by NBS, only two reported home price gains both in monthly and annual terms in August.

Nomura, in a research note on Friday, stated, "With our view of a worsening growth slowdown under new headwinds in H2, we expect Beijing will be eventually forced to serve as the builder of last resort by directly providing funding to those delayed residential projects that have been pre-sold."

China may cut interest rates on over $5 trillion in outstanding mortgages as early as this month, according to Bloomberg News. To support this, a cut of the five-year Loan Prime Rate is likely in September, along with a 20bp cut of the medium-term lending facility (MLF) and a 50bp cut to the reserve requirement ratio (RRR), as noted by economists at ANZ in a research note on Friday.