BEIJING - Sharply decreasing fixed asset investment in the railways and increased housing inventory in the property market are cutting demand for steel, resulting in falling prices of imported iron ore in the world's second largest economy.

Inventories of iron ore at 25 of China's major sea ports dropped 1.6 percent to 97.99 million metric tons in the week ending on Dec 19 from the previous week, according to the Xinhua-China Iron Ore Price Index that was released Tuesday.

Last week's imported iron ore stock was 1.61 million metric tons less than that of one week earlier, according to the index, which is compiled by the Xinhua News Agency to track iron ore inventories and imports in Chinese spot markets.

Meanwhile, the price index for 63.5-percent-purity iron ore imports fell 4.1 percent to hit 139 points, while that for 58-percent-purity iron ore imports decreased by 1.7 percent week-on-week to rest at 117 points.

Analysts said the declining prices of iron ore are a result of a sluggish steel market amid falling investment in the nation's railway projects and increased housing inventory in the property sector.

According to data from the Ministry of Railways, fixed asset investment in railways in the first 11 months of the year plunged 28.4 percent year-on-year to 492 billion yuan ($78 billion). The decline rate widened by 3.2 percentage points compared to that in the first ten months.

In November, more major cities saw drops in new home prices from October, as housing sales slipped 1.2 percent year-on-year, with major developers such as China Vanke experiencing a 20-percent sales decrease last month.

Analysts predicted a further downward trend for the iron ore prices in the coming week as steel companies are becoming cautious in purchases amid expectations that downstream businesses will cut demand for steel.