The Chinese property market has shown signs of weakness since early last year but this time it is different from temporary declines in previous years.
The slowdown had so far lasted more than 14 months, Forsyth Barr broker Peter Young said.
In May, property prices rebounded while the growth rates for all construction-related activities - such as projects started, construction in process, construction completed and floor space sold - still did not show any clear sign of recovery.
Part of the slowdown was caused by excessively tight monetary policy in 2014.
However, from November, China started easing monetary policy, with cuts in policy rates and two cuts in reserve requirement ratios.
Also, policy makers announced a series of initiatives in late March, specifically aimed at bolstering the property sector.
Those stimulative policies could help lift construction activity to some extent, he said.
The deceleration in Chinese construction activity was evident not only at the different states of the construction process but also in nearly all sub-sectors of the property market and across provinces.
From the residential sub-sector, which accounted for about 68% of total construction area completions, to the cultural, sport and recreational sub-sector, which accounted for only 0.9% of total area completion, growth in all sectors declined dramatically, Mr Young said.
Moreover, in 26 out of 31 provinces nationwide, the growth rates of the completed construction area fell in 2014 - the highest number of provinces with falling growth since 2005.
In 2013, there were only 15 provinces with falling growth rates.
''Besides elevated inventories, we believe there are more important fundamental drivers pushing the Chinese property market down and will likely continue to do so in the next 10-15 years.''
The top influence was the change in demographics, Mr Young said.
Due to the one-child policy implemented in the late 1970s, Chinese population growth had slowed significantly from 1.3% a year in the early 1980s.
This was equivalent to a population increase of about 14 million people every year - to 0.52% last year, or an increase of about seven million.
China's absolute population increase reached a record of nearly 18 million in 1987 but had since fallen to about seven million, an ''astonishing'' 71% fall.
Most of the generation born in the peak year of 1987 would probably have already formed or would form a family over the next couple of years, as they were already 28 years old.
The annual new household formation was likely to peak this year or next, implying a sharp downward trend in Chinese new household formation was likely to occur over the next 10 to 15 years, as a result of the one-child policy.
Income and mentality was also affecting home buyers' decisions, Mr Young said.
Compared to the generation of the 1980s, the generation of the 1990s was more likely to spend money on entertainment and leisure activities, more likely to travel and move from city to city and are more likely to get married and have children late.
''In short, they would prefer to delay home buying if a huge down payment and mortgage affects their quality of life.''
The labour migration process from rural to urban was likely to slow, he said.
Most of the labour migration had already occurred in the last 20 years, when manufacturing industries were expanding quickly and the nation's economy was growing at phenomenal rates.
For those migration workers who had settled in the urban areas in the last 10 years or more, the odds were high they had already bought one or more houses when prices were far below current prices.
The residential market suffered from excess supply. Vacant homes accounted for 40% of 2014 sales.
The area under construction was more than five times 2014's level of sales while the area started was 20% higher than 2014 sales.
Chinese property developers had already started reacting to the downward trend in property markets by cutting investment in real estate and land purchases.
The largest Chinese residential property developer, Vanke, planned to cut its exposure to revenue contributed from the residential sector by 50% within the next 10 years.
The biggest Chinese commercial property developer, Wanda, planned to exit the residential market completely starting this year.
''All of these actions from developers to some extent confirm our research findings. This will imply a further decline in their investment in property markets, which will directly reduce the future construction activity,'' Mr Young said.
At a glance
• The Chinese property just started a 10 to 15-year structural downward trend driven by demographic shifts, falling income growth, social-cultural changes and excessive supply.
• The fall in metal prices may have room to run. Steel and iron ore prices could remain depressed. Copper, zinc, aluminium and nickel will also be negatively affected.
• While the residential sector will contribute the most to the drop in overall construction activity, non-residential construction will also fall because it is even more oversupplied than the residential market.
• Still, the scale and the speed of the downward adjustment in the property market could be controlled and paced by the Chinese Government's continued monetary easing in order to prevent any unintended ''free fall'' in property prices.
• Additional monetary easing may only be able to lift construction activity temporarily. The pain from a downward trending property market would only be delayed. Construction activity should eventually fall in line with underlying fundamental demand.
