Sales of residential houses in the southern city of Shenzhen are forecast to plunge this year to the level 10 years ago as homebuyers and investors continue to adopt a wait-and-see attitude as prices nosedive.

"Prices are expected to drop another 10 percent as some struggling small- and medium-sized real estate developers and speculators are selling properties for cheap to maintain cash flow," said Song Ding, a senior real estate analyst with China Development Institute.

According to the latest research report on Shenzhen's housing market in the first half of this year, released by the local land and housing authorities, the average housing prices in May fell 36 percent from the peak in October at 17,350 yuan ($2,540) per sq m to 11,014 yuan per sq m.

The total supply of new residential houses amounted to nearly 1.54 million sq m in the first half of this year, down 54 percent from a year before. About 650,000 sq m remained unsold, up 84.5 percent from the same period last year.

"Based on current sales, we forecast that just about 3.5 million sq m of residential housing area will be sold this year," said Wang Feng, director of Shenzhen Real Estate Institute.

The tightening mortgage policy has put a sudden brake on the overheating housing market, especially in Shenzhen, Shanghai and Beijing, where prices had mainly been driven by speculation.

Economic uncertainties as a result of the global slowdown and the tight monetary policy at home have also dampened the real estate market, Wang said. But he added that the current slump would soon pass. "Property demand will keep rising in the long term and Shenzhen's real estate market will regain its vitality."