(Bloomberg) -- Chinese property shares dropped after housing sales fell during the Lunar New Year holidays, underscoring the challenge the country faces in salvaging the real estate sector. 

A Bloomberg Intelligence gauge of developers fell as much as 3% on Monday by 11:10 a.m. Residential sales by area declined 14% from a year earlier during the Lunar New Year week ending Jan. 27, according to data on 40 major cities tracked by China Real Estate Information Corp.

The week-long holiday was another key test of buyer demand since policy makers unveiled a sweeping plan to rescue the housing sector in November. Migrant and white-collar workers grounded in bigger cities during Covid lockdowns had the chance to hunt for property in their home towns this year after China abruptly ended its Covid Zero policy. 

“The decline in sales continues to weaken sentiment among investors,” said Justin Tang, head of Asian research at United First Partners. “A recovery will only be visible when property policies work their way through the system, when the economy rebounds post China’s reopening and then subsequently generate an improvement in domestic household cash flow and balance sheets.”

Property sales were still down 32% during the holiday week compared with pre-pandemic levels in 2019, CRIC data shows. Buyer interest was only seen in a number of small cities with stronger fundamentals, such as the area near Huawei Technologies Co.’s operations in Dongguan, the agency said. 

“Developers didn’t really add lots of supply to capture the traditionally quick sales season, as the home market slump is still continuing,” said Chen Wenjing, associate research director at China Index Holdings. 

(Updates with analyst comments in fourth paragraph)

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