High-rise apartment buildings of a residential property project are under construction in Huaian city, east China's Jiangsu province, on Nov 9, 2014. [Photo/CFP]

Credit rating agency Standard and Poor's said on Wednesday that China's over-priced and over-supplied property market was likely to face further downgrade in the coming years.

In a new emerging market-focused report, S&P said Chinese property ratings were likely to be hit more than other large markets in Asia.

S&P said in the property report that ratings in Asia would have "a negative bias" next year because of an expected fall in Chinese and Hong Kong house prices.

The property sector accounts for more than 15 percent of China's annual economic output, banks provide much of the financing for building and buying, so a prolonged downturn poses possibly the biggest risk to the world's second-largest economy.

"Continuing sluggish sales, rising financing cost, and declining access to funding will hit smaller (Chinese) regional players...as a result, we may see further downgrades, and even defaults, at the lower end of our rating spectrum," S&P said.