Painful transition looms for property

Late last month, the People's Bank of China (PBOC) unveiled a new policy that would enable homeowners who have already repaid one mortgage to be considered as first-time buyers when they apply for an additional home loan. This will enable property owners to borrow at preferential rates that had previously only been available to new buyers.

Many see this move as one of the PBOC's most significant housing-related policy actions since the global financial crisis. Yet, over the past several years, much has changed in China's property market. Back in 2008, residential properties were in short supply and frenzied efforts to buoy the economy only fueled additional demand. But speculators who jumped into the housing market years ago are now desperate to offload their holdings. Those who cannot see this shift and its deeper implications for the housing market - and the broader economy - are only fooling themselves.

Data show that more than 80 percent of Chinese cities now have a surplus of housing inventory. With the exception of top cities like Shanghai and Beijing, many localities are now desperately overburdened. In fact, it could take upwards of a decade to digest unsold housing stocks in certain places. We must accept that certain companies will not survive and certain investments will not generate returns. Yet the fact remains that China can no longer count on the housing market to fuel GDP growth.