Ren Zhiqiang, former President and Chairman of Huayuan Property Co. Ltd., said that local governments will still have to rely on fiscal revenues from the real estate industry, and there will soon be further measures such as interest rate cuts and required reserve rate cuts. Nearly 40 industrial sectors have suffered from the downturn in the property market, including upstream sectors like iron and steel and cement and downstream sectors such as appliances and home decoration.

"The decline in the property market pulls the GDP growth rate down by at least 0.3 percentage points," said Ren.

Seeking transformation

By the end of the third quarter of 2014, the 139 property companies listed in the A-share market had a total inventory of 2.23 trillion yuan ($359.1 billion), an increase of 5 percent from the previous quarter, according to a survey by China Real Estate Information Corp. (CRIC). Of those A-share listed companies, four large property companies and 15 medium-sized ones saw their inventories rise by 3 percent and 25 percent respectively from the beginning of 2014.

According to a report by China International Capital Corp. Ltd., many Chinese property giants have large land reserves. For example, China Vanke Co. Ltd. has a land reserve of 100 million square meters, while Poly Real Estate Group Co. Ltd. and Evergrande Real Estate Group have land reserves of 76.6 million square meters and 151 million square meters respectively.

Qin Hong, director of the MOHURD's policy research center, said the proportion of acreage for sale among the total acreage in construction is now the lowest in recent years, sitting below 10 percent, which indicates that 90 percent of the homes under construction are not sold.

"In 2015, the major task for property companies will involve reducing inventory," said Zhang Dawei, Marketing Director of Centaline Property Agency Ltd., adding that, when it comes to reducing inventory, property companies are also exploring potential routes for transformation.

For instance, Wanke is seeking to become a provider of municipal support services, and Evergrande is entering the mineral water, powdered milk, agriculture and hospital industries.

Zhang Hongwei, Director of the Research Department of Tospur Real Estate Consulting Co. Ltd., said that when a property company has grown large enough, it will inevitably face the issue of transformation. Property companies have to diversify their businesses, particularly when the traditional housing market has been saturated, and seek opportunities within the urbanization drive and the aging population, or even cooperating with Internet companies.

Mixed picture

When more houses are sold and inventories in the property industry shrink, some cities will face higher risks in the real estate market.

Home sales declined in cities such as north China's Tianjin Municipality, Hefei, capital of east China's Anhui Province, and Xi'an, capital of northwest China's Shaanxi Province.

Zhu Yiming, a research fellow with CRIC, said the real estate market may develop in different directions in 2015. When the government relaxes regulation, first-tier cities will still face the pressure of price hikes, but some second- and third-tier cities will face serious pressure of inventory, which will increase the risks of decline in the property market.

Ni said it's foreseeable that in 2015, the housing market will not see robust growth in both sold areas and prices as it did in 2008 and 2011. It seems more reasonable to expect that the real estate market will undergo readjustment at longer times and deeper levels.

He also said that in first- and second-tier cities, the readjustment may be completed in a short time with increasing demand for homes, but in the third- and fourth-tier cities, it will take a longer time to complete the readjustment because of an oversupply of property.

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