John Lam, head of China property research at UBS, says the shantytown redevelopments contributed to an excess of supply, while Li says there was a failure to assess demand.

Country Garden, which narrowly escaped collapse in recent weeks, had built homes in cities where there was relatively little demand, Li says.

Across the country, she says there is now a “reality check as investors realise they cannot find tenants for the units”.

Loo says there is a lesson for policymakers across the world to avoid the mistakes made by the Chinese government.

“If there is a downturn and if policymakers want to really stimulate the economy, doing so via over-investment is probably not the right path to go,” she says. “This will lead to more severe structural issues down the road, which China is trying to unwind right now.”

Easing restrictions for first & second-time buyers

In an effort to boost demand, central and local governments have intervened to loosen some of China’s tough restrictions on property ownership.

Since 2015, the Chinese government trumpeted a mantra that “houses are for living in, not speculation” – but signalled a change in tone this summer.

Chinese leaders removed the slogan from the nation’s policymaking dogma at the end of July. Days later, China’s housing ministry announced plans to make it cheaper and easier to buy and said it would ease restrictions for people wanting to invest in a second home, according to CNBC.

Lam says the government has moved towards free market policies to shore up the real estate sector.

Local authorities have some freedom in setting their own rules but in recent weeks have started taking the lead set by Beijing.

Those who were not first-time buyers were previously required to have down payments as high as 80pc.

“Traditionally, this system has been to discourage second home ownership,” Loo says, adding that officials were concerned about speculative investment and the pricing out of first-time buyers.

The government has changed the rules so second-time buyers who do not own other properties can access the same down payments as first-time buyers. Second home owners remain subject to bigger down payment requirements.

Down payment requirements have also been lowered for first-time buyers. They used to be a minimum of 30pc of the purchase price but the floor has been dropped to 20pc.