Making property pristine again

According to Zhang of Centaline Property Agency, rising home prices in most second-tier cities have a lot to do with their policies for attracting talented professionals and skilled workers. One more reason is the lottery system that was introduced in some cities for new home purchases.

"More than 40 cities including Nanjing, Wuhan, Chengdu, Xi'an and Changsha announced a variety of favorable policies to attract talents such as offering local residence registration, setting up residential subsidiaries, and granting rent-free office areas. These policies may partly offset previous purchase limits in these cities," Zhang said.

"In addition, 10 cities－Shanghai, Nanjing, Changsha, Chengdu, Hangzhou, Xi'an, Wuhan, Shenzhen, Qingdao and Fuzhou－introduced a lottery system for new home purchases, which has given homebuyers an impression that homes are in short supply."

The latest round of tightening policies can be traced back to September 2016, when several cities started to put limits on home purchases. Such policies later spread nationwide in March 2017.

"Policy tightening centered on top-tier cities and tier-2 cities in the beginning, and started to penetrate into the rest of second-tier cities and some lower-tier cities," said Xu Xiaole, chief market analyst with the Ke Research Institute, a research organization under the aegis of online real estate brokerage platform Ke.

Compared to previous tightening policies, Xu said the latest campaign has set up a record in terms of its scale, frequency and intensity. But to make such policies effective, what is required is high level of systematization and integrity, experts said.

"We are in the middle of establishing a long-term mechanism, including allowing equal rights for renting and buying properties, restructuring supply and demand in the sector," said Chen Sheng, president of the China Real Estate Data Academy.

Chen further said China's leadership appear to believe that existing measures seeking short-term market stability are not adequate.

Experts are unanimous that the real estate sector will see harsher rules in the second half of this year to achieve the twin goals of stable home prices and the establishment of a long-term mechanism for that.