New home prices resumed their month-on-month decline in August, down 0.3%, Reuters calculations based on National Bureau of Statistics (NBS) data showed, dragged down by weak demand in smaller cities amid persistently slow deliveries by heavily-indebted developers. Prices were unchanged in June and July.

More significantly, prices extended their year-on-year contraction for the fourth month in August, with prices last month falling 1.3%, the fastest annual pace in seven years, and suggesting longer-term homebuyer aversion.

The deepening property woes are weighing on the outlook for the world's second-largest economy, which narrowly escaped a contraction in the second quarter. The sector, once a key driver of economic growth, has lurched from crisis to crisis since 2020 after regulators stepped in to cut excess debt at developers.

"The sector is still in the process of finding its bottom, though it is getting closer, even as policies have been eased across the board," said Zhang Dawei, chief analyst at property agency Centaline.

Authorities have taken steps to prop up the sector this year, including relaxations on home purchases, smaller downpayments, cuts in mortgage interest rates, and a bigger reduction in the selling price of homes.

Zhang said he expected Chinese authorities to roll out more measures in tier-one cities such as Beijing and Shanghai and tier-two cities to stabilise the market and restore buyers' confidence in the near term.

Confidence in the sector has been dampened by a mortgage boycott across the country since late June as developers stopped building presold housing projects due to strapped liquidity and strict COVID restrictions.

Separate data from the statistics bureau on Friday showed property sales declining for a 13th consecutive month in August, not helping to shore up sentiment.

Property sales by floor area dropped 22.58% year-on-year, according to Reuters calculations based on the NBS data, the sixth month in a row it suffered double-digit falls. Sales tumbled 23.0% year-on-year in the January-August period.

After the data releases, the CSI Real Estate Index (.CSI000952) on mainland stock markets fell 1.73%. The Hang Seng Mainland Properties Index (.HSMPI) in Hong Kong declined 0.73%.

UNFINISHED PROJECTS

Month-on-month price falls spread to more cities in August, with unfinished projects across China increasingly a longer-term drag on sentiment.

Out of the 70 cities surveyed by NBS, 50 reported price falls in August, up from 40 cities in July.

Home prices dropped 0.2% and 0.4% in tier-two and tier-three cities respectively, official data showed.

"It will take some time for the pool of unfinished property construction projects to be completed with local government support for developers, and in turn, for Chinese households to consider investing in property in scale again," said Robert Carnell, regional head of research at ING.

"Consequently, these numbers are likely to remain a blot on the economic landscape for quite a while."

Property investment and new construction starts by developers also fell in August, suggesting many real estate companies were still focusing on paying back debt instead of launching new projects.

Investment dropped 13.8% year-on-year in August after slumping 12.3% in July. It shed 7.4% in the January-August period.

New construction starts measured by floor area plunged 45.7% year-on-year -- its biggest fall in almost a decade -- after a 45.4% slump in July.

The fall of the Chinese yuan, also known as the renminbi, below 7 per dollar on Friday would only add to developers' woes.

Chinese property firms are the country's biggest issuers of dollar bonds, and the yuan's depreciation would only make it costlier for them to refinance their debt.