Chinese real estate investment slumped further in May, showing both extended weakness in a key engine for economic growth and the challenges facing the nation’s cash-strapped developers.

Investment in real estate declined 7.2% in the first five months of 2023, worse than the 6.2% decline recorded in the January-to-April period and deeper than economists’ expectations of a 6.7% drop.

The poor data on property investment adds to other recent signs of weakness, with May home prices gaining just 0.1% on month, compared with April’s gain of 0.3%.

The property market has “has not yet fully stabilized,” said Bruce Pang, chief economist and head of research for Greater China at Jones Lang LaSalle Inc.

“The recovery in the supply-side of the property market is lagging that of sales,” Pang said. “Property developers are focusing on existing projects instead of expanding new projects, and they’re still in need of continued policy support.”

China is weighing stimulus measures designed to support real estate, people familiar with the matter said earlier this month, aiming to boost a sector which is just not showing the kind of improvement the economy needs. Policymakers rolled out a 16-point rescue plan in November, but that has failed to unleash a big buying frenzy.

The nation’s property market is still in a “slow recovery,” National Bureau of Statistics spokesperson Fu Linghui said at a press briefing Thursday after the data was released. He said he expects the sector to gradually stabilize as supportive policies are implemented and as market expectations improve.

The property slump has broad ramifications for the economy. Many projects have been halted, leaving some buyers stranded awaiting apartments they’ve already paid for. That is affecting employment, and delaying payments to suppliers and bondholders. Several large developers are trying to restructure their debts.

One person familiar with the matter earlier told Bloomberg News that regulators are now seeking to lower costs on outstanding residential mortgages and boost re-lending through the nation’s policy banks to ensure homes are delivered.

For more on China Key Data, Liquidity Operations, click here for our TOPLive blog.

--With assistance from Ocean Hou and Yujing Liu.