Chinese investors talks with agents for a British property investment company at an international property exhibition in Beijing on May 17, 2014. Price rises for new homes in China slowed in April for the fourth straight month, an independent survey showed on April 30, even as costs in some of the country's largest cities maintained double-digit gains. - 

Housing sales in China have dropped nearly 10% over last year, and construction starts are down nearly 25%, despite nationwide easing of government restrictions on home buying and lending. The sluggish sector has left many wondering if China’s real estate market slowdown will end with a crash.

“I think that the property crash is underway,” said Anne Stevenson-Yang, research director at J-Capital in Beijing. “Once you lose the consumer’s confidence that there’s going to be price appreciation, then you can’t recover it.”

Stevenson-Yang’s team recently surveyed hundreds of properties in 44 cities throughout China. They found discounts as high as 40% on properties in all but one of those cities. In twelve of the cities they surveyed, developers were offering to finance or forgive down-payments on homes to get around a rule requiring buyers to put 30% down on a home purchase.

“So now the developers in these cities will basically write a contract that says ‘this guy already paid me 30%,’ and then give that to the bank in order to induce it to lend, when really they haven’t paid it at all,” said Stevenson-Yang.

In a country where many people buy property more as an investment rather than a place to live, economists say the threat of a property crash will mean a downturn in China’s consumer spending and will have a ripple effect throughout the world’s second-largest economy.

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