And the honest answer is: it's complicated.

First thing, property prices going down is not necessarily a bad thing, but people don't usually see it that way.

Simple truth: if you own a house, you would want house prices to go up, forever. This is true anywhere on Earth, and it's true in China too. But as a society, you can't allow house prices to go up forever. Because that means getting onto the housing ladder becomes harder and harder, young people would have to rent forever. Their income thus funneled into the property owning class, inequality goes up, stability goes down, and so on. Everyone can see the problem, but not all governments can do something about it. This is where China, an oppressive authoritarian government, has its advantage. They doesn't have to worry about if the voters are going to elect them again. So they are afford to make some people unhappy.

But it's not that simple actually, lowering property prices is almost uniquely bad for China. Because property is universally seen as the vehicle to preserve wealth in China. In fact a majority of China's household wealth is stored in the property market [1]. Another compounding factor: China has a large pre-sale housing system. In other words, people are borrowing money to buy houses that aren't even built yet, and that accounts for 90% (!!) of house sales [2]. I'm sure you can imagine, when property prices go down in this kind of system, people are gonna get really really mad. In fact people got so mad they got onto the street! If you know anything about China, you know how big of a deal this is. This sort of thing just doesn't happen in China. Last time this happened, people died and that particular event even became a freaking internet meme.

And all that plus the fact property developers in China are often choose to take a lot of risk and are highly leveraged 3. This is almost reminiscent of the subprime mortgage crisis, yet a catastrophe similar to the 2008 crash hasn't hit. Why? Because China's government has a much stronger hold of the economy, and they are much more willing to intervene than any western capitalist country. Being authoritarian also helps. They have a lot more policy lever they can pull, so they can allow the property prices to gradually fall, without taking the entire economy with it. Which is kind of unimaginable in the US.

This is not to say their system is perfect - and that's without talking about their horrible human rights records. Their policy makers are human too, and make mistake. Their stock market will rise and fall, the point is you shouldn't try to fit what happens in China into the typical western economy boom-and-bust narrative. That's not how it works in China.

[1]: The portfolio of the average household in China is more highly concentrated in real estate than elsewhere. For instance, 62 percent of its assets are in real estate, compared with 38 percent in Japan and 28 percent in the United States. (2020) Source

[2]: Developers have responded to restrictions on accessing other sources of funds by increasing their use of presale funding (Graph 5). While presales have long accounted for the bulk of new residential property sales in China, their share has increased from around 80 per cent to almost 90 per cent since 2016. (2020) Source