(Photo : Wenzhou, once one of the most popular places for real estate investment in China)

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Wenzhou, once one of the most popular places for real estate investment in China, is suffering from a crushing price drop in house prices. House prices in Wenzhou dropped 2.4 in July from a year ago. And house prices in Wenzhou have fallen year-on-year for 23 consecutive months since September 2011.

Now, the real value of many houses is far less than the bank loans. The situation is becoming increasingly common in Wenzhou. Furthermore, the housing market slump has caused social credit risk, which has led some people to abandon their houses and just run away without repaying the loans.

In order to activate Wenzhou housing market, on August 6^th, Chinese government relaxed restrictions on Wenzhou's property purchases to allow people to buy second houses there. Under the new rule, first-home buyers in Wenzhou can now buy two houses.

Earlier in March 2011, China issued a restriction to ban people of 46 cities (including Wenzhou) from buying second properties to prevent the real estate bubble. This time, Wenzhou becomes the first city to ease the property controls.

According to a chief judge from a Wenzhou's court, from 2011 to present, the court has closed down more than 3000 units of houses, among which, there is only a small part for auction now. Due to the loan crisis affects since 2011, the number of the houses, which are auctioned commissioned by Wenzhou Justice Bureau, has increased significantly.

Today, the amount of Wenzhou's new commercial housing has declined 30% to 40% comparing to its sales peak. Some mansions are even not finished. Therefore some people who borrowed a lot of money have run away because the value of their properties has diminished seriously, and they can't pay back the loans.