At an ongoing real estate fair in Beijing, 26 developers have offered discounts ranging from 2 to 16 percent on more than 2,300 new homes. The price of some villas in the Beijing Economic-Technological Development Area has dropped by 25 percent to US$882,352-US$1.1 million; apartments in this area have also been cut by some $150 per sq m to around $800 per sq m.

Even at these discounts, however, it will take years to sell off the existing inventory of new homes. Beijing has some 144,933 unsold homes, with a total floor area of 18.8 million sq m, according to Yahao, a leading real estate service corporation.

Nationally, there are 210 million sq m of unsold houses; E-House China's Research and Development Institute estimates they will take three years to sell. And builders are sitting on some 1.19 billion sq m of land that has yet to be built on.

So far, however, many consumers are not impressed.

Liao Xiaoyong and Liu Yanxi, a newly married couple in Beijing, have postponed looking for an apartment, hoping the prices will drop further. In the meantime, they have hired a carpenter to make their furniture, hoping this will save them money in the long run.

"Since I met my wife three years ago, prices have gone up way beyond our ability to pay," said Liao. "At this point, I think it's better to wait. I don't see prices rising again any time soon."

Analysts expect overall demand to drop this year, as buyers like Liao and Liu wait out the market. Morgan Stanley has forecast a drop in the share prices of such leading developers as Aoyuan (26 percent), Hanglung (45 percent) and Country Garden (60 percent).

Still developers can only go so far to woo buyers, as their operating capital dwindles.

"Most of them will not admit it, but half of the developers out there do not have enough capital right now," said Jerry Lou, an equity stategist at Morgan Stanley.

In recent years, many of the heavyweights in China's real estate industry went public, hoping to raise foreign capital. When the global economic crisis hit, this strategy backfired in many cases.

Housing giants like R&F, Country Garden, Shimao, and Greentown are now listed on the Hongkong exchange. Last year, however, the price of their shares all plunged by more than 80 percent.

The health of the housing market is a source of national concern.

"The situation now is that developers and local governments are unwilling to let housing prices go down substantially. But unless they sell more homes, it will start to affect suppliers of everything from steel to furniture to appliances," said Lou.