Challenges and opportunities
In accordance with China's call to reduce inventories and lower home prices, a price war in the real estate sector could be coming, Yin said. Consequently, the sector's development has run into bottlenecks.
"A bunch of uncompetitive, unremarkable firms will be knocked out,"Yin said. "Survival will be the main challenge going forward."
Chen echoed Yin's view, but noted that real eatate companies will have opportunities as well as challenges as they reduce their inventories.
It's an opportune time for these firms to transform themselves.
"Developers will not only focus on building homes, but also consider expanding into other areas in the industry, such as property management and community development," Chen said.
For example, many domestic companies, such as China Vanke Co, China's biggest property firm by sales revenue, may try to spin off their property management sectors in a bid to get these assets listed in the future, he said.
Renting houses is also an effective way to cut inventories, Yan Yuejin, research director of the Shanghai-based E-House China R&D Institute, was quoted as saying by the China Securities Journal on December 29.
In 2014, China proposed that property firms could try to transform from home sellers to home renters, and developers are likely to promote the process as more policies emerge to improve the supply structure of the market, Yan was quoted as saying in the report.
Looking ahead
As the government has continued to provide support for the domestic economy and make credit more available for the real estate sector, the sector will eventually recover, the news portal caixin.com reported in July.
The real estate rebound will extend from first-tier cities to second- and third-tier cities, and the domestic property industry is seeking a new balance by reducing housing inventories at a faster pace, according to caixin.com.
"The third- and fourth-tier cities are the key targets for the inventory cuts," Chen said.
Domestic home prices rose for eight consecutive months in 2015, official data showed. Home prices rose in 51 cities in December, up from 41 in November.
"Home prices in first- and second-tier cities will not change that much, and might even continue to rise in the future," Chen said.
The domestic property market should comply with the economic development model, the CASS report said. Policies should be rolled out that allow home owners to deduct mortgage interest payments from their income taxes with the aim of lowering repayment pressure.
