While property prices in top-tier Chinese cities are booming, prices in smaller cities, where most of China’s urban population lives, are still sinking, complicating government efforts to spread wealth more evenly and arrest slowing economic growth.
Property has a special place in the psyche of Chinese investors, far outstripping stocks and bonds as a vehicle for their savings, so sliding property prices have a big impact on individual wealth and domestic consumption.
“As the real estate market is tied to many comprehensive industry lines and consumption, it is one of the key industries to support the Chinese economy,” said Albert Lau, CEO of property firm Savills China.
The weakness in property and related sectors, accounting for an estimated 20% of GDP, has been a big drag on Chinese growth, which hit a 25-year low in 2015 and is set to slow again this year.
A property revival could also play an important role in China’s recent pledge to lift 50mn people out of poverty by 2020.
The regional variations in the market are stark.
In top-tier cities, prices rose at their fastest pace in almost two years in February, with Shenzhen, Shanghai and Beijing prices surging 56.9%, 20.6% and 12.9% from a year earlier, prompting policies to try and cool the market in some cities.
But further down the pecking order, many places are still grappling with the excesses of the last debt-fuelled property frenzy, which began in around 2005 and finally ran into the sand in 2014, leaving a huge backlog of unsold and unfinished developments.
In the port city of Tangshan, a big steel-producing city in the northern province of Hebei, developers built frenetically in the boom years, creating a surplus of properties that analysts estimate could take up to 13 years to unwind.
For the 18th consecutive month, home prices in Tangshan fell in February from a year earlier, official data showed.
It is littered with unfinished buildings – Reuters counted at least 10 such housing projects there last week – and each one represents countless individual misfortunes, as developers abandon projects and run off with downpayments.  On one ghost development called “Youth Zone”, a lifeless block set in withered grass, graffiti on a steel door into the site reads: “Give me back my home”.
A 50-year-old investor who gave her surname as Ma said four years ago she made a downpayment of 120,000 yuan ($18,400), several years of savings, for a new apartment on another project. Soon after, it ground to a halt and the developer went missing, along with her money.  “There aren’t many people around in Tangshan who haven’t been caught in a property trap in recent years,” she said.
Her sister paid nearly 600,000 yuan for an apartment in Youth Zone, but the cash-strapped developer stopped work last year.
Mo Bin, president of Country Garden Holdings, the 7th-largest property developer by sales in China, is optimistic, however, that government tax and stimulus policies will reinvigorate housing investment in the smaller cities.
“We are a brand-name seller in third and fourth-tier cities, and we don’t have many years’ worth of inventory to clear; in the future we will raise selling prices, not cut them,” he said.  But not all share that view.  Hu Baosen, president of Central China Real Estate, a developer focused on investments in the province of Henan, said his company was moving out of property development to focus on selling property-related services.
“I am not optimistic on the outlook for the housing market in tier-three and tier-four cities,” he said.
“I reckon the destocking process in Henan province may last for the next five years.”
Local officials have used innovative methods to try to revive their property markets, a task made particularly urgent given many of them depend on selling land to developers to fund their budgets.
Some have tried to get migrant workers and farmers to buy up excess inventory, but so far have not hit their targets, said Chen Yajun, vice-head of the planning department of the National Reform and Development Commission (NDRC).
China’s system of residential registration, and the welfare benefits that flow with it, have in practice been a barrier to such buyers, he said.
Lau, at Savills China, said real demand for houses in these cities would require economic renewal first.  “Most third- and fourth-tier cities in China have not achieved economic maturity and diversity, and rely heavily on export processing or other traditional industries. As a result, destocking in these cities tends to lag behind.”