BEIJING, June 4 Reuters A plunge in China39;s new housing construction is fuelling hopes the battered property sector is finally coming to terms with chronic oversupply, but a cleanup of bad assets is the missing policy piece that keeps Japanlike stagnation fears alive.

On paper, the world39;s secondlargest economy is almost where the U.S. and Spain were when their late 2000s property crises began to stabilise, with new Chinese housing construction now at less than half its 2021 peak.

This could indicate, analysts say, that home building activity may find a bottom within a year or so, removing some of the weight China39;s real estate troubles are placing on economic growth.

It39;s reasonable to expect that construction will stabilise soon, said Rhodium Group partner Logan Wright.

New home starts in China fell 63 from their peak to 634 million square metres 7.46 billion square feet in the 12 months through April.

Taking into account demographics and other factors, the International Monetary Fund estimates fundamental demand for housing in China to average 950 million square metres over the next 10 years.

Some of the demand would have to absorb China39;s giant existing inventory, therefore the Fund projects new housing starts to average 715 million square metres slightly above current rates.

This could mean real estate investment, whose steep 10 backtoback annual declines JPMorgan estimates chopped 1.5 percentage points off China39;s economic growth in each of the…