Owing to a stock market that has been bearish for some time, many Chinese believe the best way to keep their money from depreciating is to buy property.

China's vacancy rates were around 22.4 percent, suggesting a considerable overhang of inventory, according to the China Household Finance Survey carried out by Southwestern University of Finance and Economics.

In Hohhot, capital of north China's Inner Mongolia Autonomous Region, housing stock is close to 120,000 units, while monthly sales are running at about 1,000, according to data from Centaline.

At the end of June, Hohhot became the first city in China to put an end to restrictions on home purchases. Centaline estimated that more than 30 cities may follow suit within this year.

Some cities have taken a different track by offering easier access to local hukou—permanent residential permits—to boost sales, such as Wuhan, capital of central China's Hubei Province; Haikou, capital of south China's coastal Hainan Province; and Wuxi, in east China's Jiangsu Province.

In Hangzhou, capital of east China's Zhejiang Province, where home prices fell the most in May among the 70 major cities monitored by the NBS, several property developers have given homebuyers an option to sell back their apartment in several years for prices above the purchase price, in order to lift lackluster sales.

In Guangzhou, capital of south China's Guangdong Province, almost 20 housing developments have rolled out no-down-payment plans to boost sales, according to a report from Nanfang Daily.

The Central Government has made tacit acknowledgement of the lifting of property curbs by local governments.

Jiang Weixin, former Minister of Housing and Urban-Rural Development, said earlier this year that the ministry will emphasize "differentiated control." When striving to increase the residential land supply in cities that are facing great upward price pressure—a reference to first-tier cities such as Beijing and Shanghai—it will also give local governments a bigger role in their real estate policies, based on local conditions.

New round of adjustment

Feng Jun, chief economist of the Ministry of Housing and Urban-Rural Development, said the slowdown that the market is experiencing represents normal adjustment. Feng attributed the year-on-year fall in new projects and sales numbers to large bases in 2013.

China's real estate market had previously experienced two rounds of adjustments, one from the end of 2008 to the beginning of 2009, and the second from the end of 2011 to the beginning of 2012, respectively.

China's property market downturn this time will be more prolonged than the last two corrections, said Tom Byrne, a senior vice president at Moody's Investors Service.

Grant Ji, Senior Director of the Investment Department at Savills Plc. in Beijing, said this round of market correction has been triggered mainly by credit tightening. He said that if mortgage and credit policies remain the same, it is hardly foreseeable that the market will be able to make a strong recovery.

Concerned about a sharp downturn in the property sector, the central bank recently ordered commercial banks to quicken mortgage lending.

Chu Jianfang, chief economist at CITIC Securities, said this latest round of property adjustment will be a long-term one.

"After this round of price adjustment, the function of real estate in the broader economy will be changed. By lifting purchase curbs, pushing forward urbanization and regional economic integration, the price fall can be eased," said Chu.

A business reshuffle featuring a rise in mergers and acquisitions in the property sector is likely to occur because big property developers will swallow cash-strapped small ones that are less capable of withstanding price falls and fund shortage, analysts say.