China’s property bubble is bound to burst as the government’s efforts to clear the pile-up of unsold flats is unlikely to work, say market experts. Property inventory in China rose to a record 6.2 billion square metres by the end of 2015, which, according to the China Index Academy, would take at least five years to clear at the current speed of sales. “The challenge is huge, the inventory figure does not factor in shadow inventory,” said Bocom International chief China strategist Hong Hao, alluding to unsold homes in the secondary market. “Recent measures like lowering down payment will do little to turn the tide.” The current property ownership already accounts for 90 per cent of the population and the current stock could easily make it 100 per cent, Hong wrote in a report this week, estimating that the remaining 10 per cent translates into 46 million households in need of a house. “And we have ignored the rental demand and the necessity of sharing due to high property prices,” Hong said. “With the current high prices, it is hard to say the Chinese property market is not in bubble territory.” READ MORE: China slashes down payment to buy homes to its lowest level since 2008 at 20 per cent in further stimulus to housing market “Many third- and fourth-tier cities are already in deflation, and their inventory level may never go down,” Hong said, warning that the bubble will inevitably burst. Divergence in China’s property market has intensified in recent years, with home prices skyrocketing in top cities and stabilising in second-tier cities but plunging in smaller cities, where supply has far outpaced demand due to a sluggish economy. The economic growth of the world’s second-largest economy has now slowed to 6.9 per cent, the lowest in 25 years. The government has initiated a number of measures to destock the pile-up. In the latest policy move, first-time homebuyers can put down a minimum of 20 per cent down payment, from the 25 per cent stipulated previously. But it is not applicable to first-tier cities such as Beijing and Shanghai, in order to keep speculation at bay. Though some expect the new measures to benefit some second-tier cities where demand is still strong, analysts are not upbeat about destocking and overall investment prospects in the sector. Han Shitong, deputy director of the Guangdong Real Estate Industrial Research Association, said the new policy is actually applicable to a very limited number of people. “Only those who can’t afford a 25 per cent deposit but can pay 20 per cent will be affected,” he said. “But the bubble is in the wider third- and fourth- tier cities. What will the local governments and developers do there?” These small cities are the ones that are weighing on the country’s property market, and by extension the Chinese economy. According to Orient Capital Research, home construction in third- and fourth-tier cities accounted for 67 per cent of the country’s total in terms of value in 2014. or 17.1 per cent of China’s gross domestic product. A failure in destocking will result in the failure to spur property investment, Hong said. China’s property investment growth slowed to 1 per cent last year, the worst since 1998. Developers are not bidding for new land or starting fresh projects as the inventory mounts. The central government has listed destocking as one of the top national priorities this year to prop up the property sector, which accounts for about a third of China’s GDP. Apart from reducing down payment, central leaders have also urged local governments to make it easier for migrants and rural famers to buy flats in cities, especially in third- and fourth-tier cities, through supportive policies such as a reform of the household registration system, cash subsidies and extending the government-sponsored Housing Provident Fund to farmers. “The policy direction is correct, the key is to attract population to move to smaller cities and settle there,” Han said. “But the policy has come a bit too late to prevent a systemic collapse,” Han said.