UBS says that China's economy will slow down over the next two years as a result of the country's real estate downturn, the investment bank said in a research report.

"We forecast China's GDP growth to slow to 6.8 percent in 2015 and 6.5 percent in 2016," said Wang Tao, UBS chief China economist in the report. "This slowdown is mainly driven by the ongoing property downturn."

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Wang added that the weakened real estate market will likely pull down domestic demand through softer construction, weaker heavy industry production and investment, and slower income growth, Wang added.

China's gross domestic product (GDP) expanded 7.3 percent from the third quarter of last year, compared with 7.5 percent in the second quarter and 7.4 percent in the first quarter of this year, according to official economic data.

According to the China Index Academy, the average price of a new home in 100 major Chinese cities in October fell for the sixth-straight month. That average price was equal to 10,629 yuan ($1,738 U.S.dollars) per square meter, which was down 0.4 percent from last month.

However, in order to ease the effects of the economic slowdown, Wang believes that the Chinese government will continue to provide policy support.

"The government may relax mortgage lending more significantly by lowering the still high down payment requirements and cutting mortgage lending rates," Wang said. "In addition, property related transaction taxes and fees may be lowered."

She added that China is unlikely to face a financial crisis as a result of the economic slowdown, considering China's high domestic saving, largely closed capital account, government control of the banking system, and manageable government debt.

TagsUBS, Chinese Real Estate Market, China property market, Wang Tao