A delivery truck loaded with electronics and appliances moves through a housing project in Chongqing. The nation's second-tier cities will probably see a 10 to 20 percent drop in property prices.  [Photo / Agencies]

BEIJING - The inventory in China's property market will surge in the second half of the year, thus prompting property developers to cut prices further as tightening measures continue, industry experts said on Tuesday.

According to Stephen Green, head of research at Standard Chartered Bank (China) Limited, oversupply will be the story of China's property market in the second half of 2011 and in 2012.

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"We estimate that there are three months' worth of inventories in the 35 biggest cities right now, and that will rise to seven months by the end of the year," Green said. "Developers are increasingly thinking about cutting prices. As inventories rise in the second half of the year, their incentive to cut prices will also rise."

Statistics from the Beijing Real Estate Transaction Center show that a total of 43,975 apartments (excluding low-cost housing) were sold during the first six months of the year, down 15.7 percent from the same period in 2010.

According to Centaline Property Agency Ltd, property transactions in Beijing in 2011 may reach a record low for the past decade.

A recent report by the China Real Estate Finance Institute and Beijing Beita Consulting Co said the nation's first-tier cities will probably see a 30 percent drop in property prices, and the room for declines in second-tier cities will hover at around 10 to 20 percent.

Meanwhile, as the government's tightening policies continue and market transactions remain sluggish, around 20 to 30 percent of listed property developers are facing a squeezed cash flow, thus leading to a merger-and-acquisition market valued around 230 billion yuan ($35.6 billion).

Some property developers have still achieved robust sales in the sluggish market. China Vanke Co Ltd, the country's biggest developer by sales, said on Tuesday that the value of its sales in June rose 50.8 percent from a year earlier to 13.2 billion yuan. The value of the company's sales surged 78.6 percent year-on-year to 65.6 billion yuan in the first six months.

To meet the market challenge, many property developers have changed strategies and diversified their product lines.

"As all the tightening measures are targeted at speculative investors, we repositioned our products for self-use buyers," said a marketing chief at Runfeng Real Estate Development Co, who declined to be named.

The company's project in the Yizhuang district of Beijing still receives an average of 30 groups of people each day, as most properties feature a three-bedroom apartment with floor space of 90 square meters.