China’s online property market industry appears set for a prolonged downturn that will last far into 2017 and potentially beyond, according to analysts who say government policies intended to steady the housing sector have depressed sales and have had the expected effect of reducing demand for the online property services.
The projection of an extended downturn in the online property sector follows years of both growth and contraction, and the volatility in the market is one of the reasons that the government is imposing strict rules to avoid a housing market crash. If China were to experience a housing market bubble that burst, it would create significantly greater economic problems affecting more sectors than a narrower decline affecting just the property market.
According to a report released this week by economic analysts Alvin Jiang and Alan Hellawell from Deutsche Bank, the declining Chinese property market “is entering a long winter for at least six months.”
The South China Morning Post notes that the analysts believe that this downturn will last through to end of 2017, which could mean it lasts even longer — potentially into 2018. The analysts say that the decrease in the market can be directly connected to government policies that aim to avoid a housing market crash by imposing strict requirements on several important factors such as managing property prices and limiting transactions. 
In their report, the analysts said, “Both the online property transaction business and the related listing business are suffering from the cold property market. Continuing strict policies have frozen transactions and hurt the desire of property agents to spend,” which has led to major drops in property transactions. For example, the report says that the volume of property transactions in China’s top 10 cities dropped 25 percent in October.
The Chinese Online Property portals
Given the downturn, the analysts decided to downgrade their rating of the online property portal sales SouFun to “sell,” citing “continuing weakness” in the sector as well as the company’s apparent “scaling down” of operations. The analysts also downgrade 58.com — another online property sales portal — to “hold” rather than “buy” for similar reasons, because it “reflect[s] our concern on the continuing weakness in the property segment.”
However, a blog post on Barron’s Asia notes that the analysts’ report appears to be late in coming, because the property market was already experiencing a freeze before the release of the findings. 
“Isn’t Deutsche a bit too late to the game?” asked the blog post, which noted that SouFun had already dropped 60 percent in value and 58.com had experienced a similar 50 percent decrease this year.
The conclusions on the downturn in the market are in contrast to news reports earlier this year which said that SouFun was among several online property companies enjoying a rebound of growth.
For example, Bloomberg Technology reported as recently as March this year that due to a combination of government stimulus funding and a growth in the property market SouFun recovered 25 percent on the Bloomberg China-U.S. Equity Index compared to February this year. 
The Deutsche Bank analysis underscores the unpredictability and volatility of the housing market, and suggests that online property companies might need to rethink their strategies for 2017.