In the latest move, a new property tax would be introduced in six cities including Beijing in a pilot scheme for a new tax nationwide, Xinhua reported yesterday. It did not name the other cities.

The governor of the People's Bank of China, Zhou Xiaochuan, said on Saturday the central bank would introduce further monetary measures in cities where home prices were rising too fast.

Mainland newspapers reported that officials from the Ministry of Construction met informally in Shanghai on Sunday to discuss policies to cool rising property prices.

'Further short-term tightening measures are inevitable as the central government is worried rising home prices pose a threat to the stability of the country's economy,' said Liu Xiahui, an economist with the Chinese Academy of Social Sciences.

The academy said the domestic market would remain overheated as the central government struggled with reforms to ensure sustainable growth, including curbing property speculation.

Real estate accounts for a fifth of the mainland's fixed-asset investments, enough to have a significant impact on the country's economy, according to Mr Liu.

'Rising home prices will push up demand for raw materials such as steel and cement. All these could lead to an overheated economy.'

China's economy grew 9.5 per cent in the first quarter, the government reported last week.

The National Development Commission said property prices in Shanghai jumped 19 per cent in the first quarter.

Prices in Beijing and Guangzhou rose an average 6.5 per cent and 4.8 per cent, respectively.

The surge prompted Premier Wen Jiabao to express concern last month at rising property prices. The State Council and State Land Bureau then jointly released an announcement to various government officials requesting that they intensify efforts to curb property speculation and rising prices.

Many cities have since adopted policies similar to those at state level.

An analyst at Shanghai property agent Centaline China, Zhang Haiqing, said the city's booming market had shown signs of deflating since the municipal government had launched cooling-off measures in the past two months.

These included higher interest rates on home loans, a ban on new mortgages for flats sold less than a year after purchase and a 5.5 per cent capital gains tax on properties sold within a year of purchase.

'Some speculators failed to complete deals after the banks tightened mortgage lending,' said Ms Zhang.

'They have been forced to dump their stocks at below market price.'

The Shanghai government also announced plans to put 2,000 mass housing units on the market by the end of this year in an effort to stabilise the market through increased supply.

'The market will be further hit by coming measures,' she said.

But some property consultants questioned the effectiveness of the measures, saying limited land supply in cities such as Shanghai was pushing prices up.

Mr Liu agreed that prices in Shanghai would rise in the long run as a result of a shortage of new land supply. 'But prices are rising too fast. Short-term measures to cool down the market are needed,' he said.

'Higher transaction fees and further credit tightening are predicted.'

Property consultants said the new property tax would have a significant impact on the market.

The central government is considering introducing a new tax to replace the various levies on property in order to simplify the tax system, according to the general manager (Beijing) of DTZ Debenham Tie Leung, Vincent Luk Fung-siu.

The new tax is likely to be higher than under the current system in an effort to slow speculation.

But property consultants and economists said the new tax would not be imposed in the short term.

Mr Luk said there were many unresolved technical problems, such as whether to tax on floor area or market value.

Mr Liu said changing a tax system was complicated.

'It takes time,' he said.

Key property policies since March NPC

March 7

Shanghai Tax Bureau

5.55% capital gains tax for property transactions with less than a year holding period

March 16

PBOC

Mortgage rate up by 0.2% to 5.51% initial deposit raised from 20% to 30% of property price

March 28

Shanghai Banking Association

Maximum lending for non-residents cut to 50% of property price and limited to 70% for residents

March

Hangzhou

Land supply for villa construction stopped

April 1

Shenzhen Government

Anti-speculative measures in property market

April 1

State Land Bureau

Increased administrative control of property price increases

State Council

Penalties imposed on officials who have not effectively implemented policies

April

Guangzhou

Plans to levy fee and taxes on vacant land (monthly basis)