(Bloomberg) -- China home prices fell at the fastest pace in almost a year in September, adding to doubts over whether Beijing’s steps to prop up the property market are enough to revive the sector. 

New-home prices in 70 cities, excluding state-subsidized housing, declined 0.3% last month from August, when they slipped 0.29%, National Bureau of Statistics figures showed Thursday. That was the steepest month-on-month decline since October 2022.

Prices slid 0.48% in the secondary market, matching the previous month’s decline which was the largest recorded since 2014. The price cuts came even as major cities rolled out measures to stimulate the market, such as lowering mortgage rates and down payment requirements.

Chinese developers are grappling with a years-long slump that’s starved them of cash, delayed completion of apartments and deprived the economy of a key growth driver. Home sales and property investment remained a drag on economic output last quarter, underscoring why policymakers have taken steps recently to rekindle demand. 

The real estate crisis marked another grim milestone this week when Country Garden Holdings Co., once the nation’s biggest builder, signaled it was likely to default on a dollar bond for the first time. Household worries about developers lacking cash to complete properties is one reason sales are falling.

Falling prices are another deterrent to homebuyers in a country where property has long been one of the main stores of wealth. Sentiment is also worsening among investors, with a Bloomberg Intelligence index of Chinese developer shares falling to a 14-year low on Wednesday. 

The value of output by China’s real estate sector contracted 2.7% in the third quarter of 2023, according to separate data released by China’s statistics bureau. Output in the sector has contracted for eight of the last nine quarters, by far the longest slump recorded since China established a private property market in the late 1990s.

Service and consumption sectors recorded strong growth in the third quarter, with output in hotels and catering up 12.7% and IT and software up 10.3% on-year compared to a lockdown-hit 2022. Manufacturing output expanded 4.5%. Chinese officials have said that strong growth in hi-tech and consumer sectors can help compensate for property weakness.

However, growth in the electric battery, new energy vehicle and renewable energy sectors can only partially offset the hit to GDP and employment from the shrinking property sector, Goldman Sachs Group Inc. economists led by Maggie Wei wrote in a note Thursday. 

Expansion in those sectors combined with real estate decline and falling traditional car production would still reduce economic growth by 0.5 percentage points per year from 2023-2027 while the net impact on urban employment will also be negative, they wrote.

Given its economic importance, officials have made increasing efforts to stabilize housing, with the government allowing major cities to cut down payments for homebuyers in September in one of the most significant stimulus moves tried so far. Several other measures, such as relaxing the floor for mortgage rates on first-home purchases, have also taken effect. 

There are some signs that the steps are having a positive effect. Outstanding medium- and long-term loans to the household sector, a proxy for mortgage lending, increased by 543 billion yuan ($74 billion) in September from the previous month, the most since March.

But lukewarm home sales during a recent key vacation season stirred concerns about whether the existing support is enough to spark a recovery. 

“Looking ahead, the main risk still comes from the property sector, which is not out of the woods yet,” said Larry Hu, head of China economics at Macquarie Group Ltd.

(Updates with more GDP data, analysis.)

©2023 Bloomberg L.P.