China's slowing property market poses the most substantial macro risk to its economy in the coming quarters, analysts at JP Morgan said.
If real estate investment were to slow another 5 percent, it could shave 0.6 percentage points from China's already-flagging gross domestic product growth rate, according JP Morgan analysts. However, the risk of an actual house-price collapse remains limited as the authorities still have room for policy adjustment, they added.
"A housing market adjustment may pose the biggest macro risk in China in the coming quarters, mainly via a slowdown in real estate investment and a decline in land sale revenues," the analysts said.
China's property market has turned a corner this year after government-imposed restrictions successfully cooled the previously frothy market.
After a bumper 2013 home sales in the first four months of 2014 fell 9.9 percent in value terms versus a 26.6 percent rise in 2013, JP Morgan's data showed. Meanwhile, home inventory in China's ten largest cities increased from 10 months' sales at the beginning of the year to 17.7 months in April.
Furthermore, the number of cities that reported price declines in April rose to 45 out of 100 from 37 out of 100 in March, the most since June 2012.