BEIJING: Prices of new homes in China saw their sharpest decline for seven years in October, data showed Wednesday, as the real estate sector was battered by a debt crisis and a slowing economy.

Property market has long served as a motor for growth in China, on the backs of rising standards of living and high demand in a country where home ownership is seen as a prerequisite for marriage.

But uncertainties linked to Covid-19, which have cooled demand and weighed on household income, are hitting buyers, at a time when several major real estate groups in China are in financial difficulty.

The price of new homes contracted 1.6 percent year-on-year, their sharpest decline since August 2015, analysis of figures from Beijing’s National Bureau of Statistics (NBS) showed.

Real estate prices fell in 58 cities, according to the NBS, which aggregates the average price in 70 cities across China.

Prices in the mega-cities of Beijing and Shanghai bucked the trend.

The figures come after China’s banking regulator unveiled sweeping measures to rescue the struggling property sector last week.

China new home prices down less in Dec on promotions, easing curbs

Those included credit support for debt-laden housing developers, financial support to ensure the completion and handover of projects to homeowners, and assistance for deferred-payment loans for buyers.

Friday’s measures emphasised “guaranteeing the handover of buildings”, and ordered development banks to provide “special loans” for the purpose, according to a copy of plans circulating online.

Property and construction account for around a quarter of China’s gross domestic product, but crippling debts have forced a series of developers to default on loans while others have struggled to raise cash.

Analysts have raised fears that the crisis could yet spread to the country’s financial sector at a time when Beijing’s hardline zero-Covid policy has also put a lid on growth.