Real Estate

Will China's property market unravel in 2015?

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China's wobbly property market has kept investors on edge this year, but the country's first rate cut in two years is expected to bring some stability into the all-important sector in 2015.

"Sales volumes will stabilize amid increased mortgage availability and improved buyer's sentiment following various supportive policies including the recent interest rate cut," Moody's Investors Service wrote in its '2015 Outlook –China Property' report.

Residential property sales are forecast to decline between 0-5 percent next year, a far slower pace than this year's near-double digit fall. Sales plunged 9.9 percent on year in the first 10 months of 2014.

Beijing recently introduced measures to prop up the housing market – which accounts for 15 percent of China's economy and impacts more than 40 industries – including lower mortgage rates and down-payments for some home buyers and cutting interest rates.

Last week, the People's Bank of China unexpectedly eased monetary policy. The central bank lowered its benchmark lending rates by 40 basis points to 5.6 percent and deposit rates by 25 basis points to 2.75 percent.

Read MoreWhy China's property slowdown isn't so scary: Goldman

Johnson Hu, analyst at CIMB believes the move is an inflection point for the housing market that could drive a sustained sales recovery.

"The PBoC's (People's Bank of China) rate cut is a strong catalyst for the China property sector as a) there is room for further cuts in mortgage rates, b) home buyers may see it as a signal of property market stabilization and thus boosting home sales and lowering housing inventory," he said.

Read MoreChina's home price decline appears to be easing

Historical patterns show that the first rate cuts in a cycle – September 2008 and June 2012 –helped drive a pickup in sales that lasted 1-1.5 years, according to CIMB. Home prices also started to rebound in 1-2 quarters after the first interest rate reduction.

Price outlook

Moody's is less optimistic recent easing will halt the decline in prices, however.

"High inventory levels will continue to pressure developers' working capital and profit margins, and weaken their pricing power," Moody's said, noting prices will continue to decrease as developers offer promotions and discounts to boost sales and liquidity.

Read MoreSigns of a floor inChina's property market

Average new home prices in China's 70 major cities fell 2.6 percent in October from a year earlier, the second consecutive month showing an annual fall, according to Reuters. Moody's declined to provide specific guidance on price declines.

Will China's rate cut effectively mitigate growth risks?
Will China's rate cut effectively mitigate growth risks?

Rate cut no panacea

Jinsong Du, research analyst at Credit Suisse, meanwhile, doesn't believe the rate cut will have a lasting impact on the market unless it's accompanied by an increase in liquidity.

"Although further interest rate and RRR (reserve requirement ratio) cuts have now become more likely, it remains unlikely that money supply will grow at a magnitude similar to 2009 and 2013 levels," he said. "Therefore, we continue to expect a flattish housing market [in 2015]."