China’s housing prices fell in May for the first time in nearly two years, as fresh data indicate more cities with price declines and weaker sales.

Average new-home prices fell 0.3% in May from April, a turnaround from the 0.1% monthly gain recorded for April and the first decline since June 2012, data provider China Real Estate Index System said.

Year to year, average new-home prices rose 7.8% in May, decelerating for the fifth straight month, after April’s 9.1% increase and March’s 10% rise, CREIS said, citing data from its survey of 100 Chinese cities.

Prospects for China’s property market, an important engine of growth for the country’s economy, are souring. More Chinese cities recorded a month-to-month fall in housing prices in May. Out of the 100 Chinese cities surveyed, 62 showed a decline in home prices, compared with 45 in April.

Many home buyers outside more-developed cities, such as Shanghai and Beijing, have shied away from the market in anticipation of further price cuts and difficulties in getting mortgages.

“We almost became home-mortgage slaves last week,” said Ou Yibao, a 29-year-old software engineer in Shenzhen, using a term for those paying off mortgages on expensive homes.

Mr. Ou, who told The Wall Street Journal two years ago that he was opposed to buying a home, said he was succumbing to family pressure to make the leap. But after realizing housing prices may fall, he said this week that he pulled back on the purchase of a 90-square-meter (969 square feet) apartment. “We tore up the contract,” he said.

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