Half-built roads, high-rises under construction and plastic garbage shining under the sun: those were the images that frequently flashed by on a two-hour drive across the green plain between the Shenzhen Bay-Hong Kong border and the third-tier city of Huizhou. Home to the most overbuilt housing market in the prosperous Pearl River Delta region, Huizhou is now at the centre of a storm that is hanging over the mainland's slowing economy. And a developer, Guang Group, is having cash-flow problems. It is not the first developer to find itself in such a predicament and nor is it likely be the last, as the mainland property market cools down more quickly than expected following last year's boom. "We are just here for a look," said a middle-aged woman accompanying a young couple as they got out of a car at the Guang Group's Blues Water project, which is under construction in a centrally located, riverfront neighbourhood. They quickly toured around the clubhouse, also the project's showroom, on a recent public holiday without much communication with an accompanying saleswoman. Five minutes later, they were gone, refusing to leave her their number when she asked for it. They were the only group to set foot in the showroom in about half an hour. Their cold reaction and the big, empty roads surrounding the luxury development stood in stark contrast to the mushrooming high-rises, and the chill is spreading to other projects. Another developer is selling its project at a discount at 6,000 yuan (HK$7,490) per square metre and helping homebuyers dodge down payment restrictions so that they can apply for mortgage loans as part of its efforts to speed up sales. Many other small cities and towns across the mainland are finding themselves confronted with the same challenge: a cooling property and land market is drying up local government coffers and will affect investment plans for big infrastructure projects such as roads and airports. "After a good year in 2013, most indicators point to a difficult 2014," said Bank of America Merrill Lynch China economist Ting Lu. "We expect a sharp rise in the number of small developers roiled by financial troubles." Huizhou's property sales reached a record 11.49 million sqmetres last year, adding the equivalent of 3.4 sqmetres of property space for every locally registered resident. The city, with an economy mainly driven by the electronics and petrochemical industries, is also home to 1.3 million migrant workers attracted by a minimum wage that rose more than 13 per cent this year to 1,276 yuan a month. Zhou Xiaren, a deputy head of property services firm Worldunion's Huizhou branch, said Huizhou's area was five times that of Shenzhen and likely destocking periods varied widely in the city, from five months in the coastal area to two years in the main Huicheng district. "Like many third and fourth-tier cities, Huizhou's population and industrial growth are two or three years behind its property development, causing an oversupply of homes at the current stage," Zhou said. The time it will take for the city to absorb its property inventory poses a serious downside risk following stellar economic growth of 13.6 per cent last year that far outpaced the 7.7 per cent achieved by the mainland as a whole. The sudden downward spiral of the market caught Guang Group off guard, with cash strains surfacing in the second half of 2012 as it aggressively expanded its footprint across the mainland, including cities far from its base in Huizhou such as Beijing and Weihai in Shandong province, and even abroad in South Korea's Jeju island. First its cash flow cracked, and then came the chain reaction: contractors stopped working without full payment, project deliveries got postponed, homebuyers protested, Huizhou's city government stepped in, and new buyers shunned its projects on sale. "It's not certain how long it will take the company to fix its problem and get new homebuyers their ownership permits," said Huang Huaiming, a property agent selling second-hand homes at a big project across the river that was built by Guang Group a few years ago. The current valuations of most of Guang Group's ongoing projects are less than their associated debts, making it less attractive to potential investors. A possible buyer is working partner Jinyuan Group, which injected 2 billion yuan last year to fund construction of some of Guang Group's projects. After a good year in 2013, most indicators point to a difficult 2014 Ting Lu, economist, Bank of America Merrill Lynch The mainland media reported that the Ministry of Housing and Urban-Rural Development sent inspection teams to seven cities in the Pearl River Delta last month, criticised Huizhou as a "disaster zone" and demanded a special report from the city government about Guang Group. They also said that banks had blacklisted Guang Group and its founder, Guo Yaoming, after they failed to repay debts despite a court ruling against them in 2012. Both Guang Group and the Huizhou city government refused to comment. Market reaction to Guang Group's problems has been much calmer than three months ago, when a report about the collapse of another small privately held developer, Zhejiang Xingrun, froze global appetite for offshore bonds by mainland developers. Nicole Wong, the head of property research at brokerage CLSA, said last month property sales in third-tier cities would drop 60 per cent by 2020, while sales in first-tier cities would grow 6 per cent and those in second-tier cities 13 per cent. "We believe the bubble can deflate gently," Wong said, citing strong demand from upgraders as well as a low home price-income ratio of between four and eight in cities apart from Beijing, Shanghai, Shenzhen and Guangzhou.