For the most part, the new rules are aimed at making it harder for speculative buyers to get mortgages. So in the hottest markets banks have been forbidden to extend mortgages to buyers from out of town.

The minimum down-payment on first homes bigger than 90 square metres has gone up from 20 per cent to 30 per cent of the purchase price, while the down-payment on second homes has been increased to 50 per cent. In some cities mortgages for third homes have been prohibited entirely.

The reaction in the stock market was spectacular. The Hong Kong-listed shares of mainland property developers went into a tailspin, with Evergrande Real Estate Group slumping 5 per cent and Country Garden Holdings sliding almost 7 per cent.

On the mainland, bank stocks were hit hard, too, helping to drag the Shanghai Composite Index down by 4.8 per cent.

Yet although the announced measures should help to deter leveraged speculators, it is doubtful whether they will be sufficient to take much steam out of the residential property market, quite simply because leveraged speculators are a relatively minor factor in pushing prices higher.

We can tell that by looking at the mainland's last big property boom. In 2007, home prices rose 11 per cent nationwide, which implies much bigger increases in the hottest markets like Beijing and Shanghai. Yet mortgage financing played only a small role in propelling the bull market.

According to figures from CEIC Data, new mortgages extended in 2007 were worth just 20 per cent of residential sales during the year. In other words, most purchases were made with cash.

The reason is simple enough. In 2007, the rate of consumer inflation jumped, hitting a high of 8.7 per cent early in 2008. Yet policymakers were slow to jack up interest rates, only lifting the one-year household deposit rate to 4.14 per cent.

As a result, deposit rates turned negative in real terms, which meant that households who left their money in the bank saw their wealth eroded.

Not surprisingly, many depositors withdrew their savings and looked for a better store of value elsewhere. Between March and October 2007, household savings deposits slumped by 852 billion yuan, an astonishing decline in such a rapidly growing economy.

Some of that money went into the stock market, but most went into real estate, pushing prices sharply higher. The second chart below shows the relationship clearly: when inflation-adjusted deposit rates turn negative, property prices surge.

Something similar may be about to happen again. At the moment real deposit rates are only marginally negative.

But with inflation pressures mounting and the mainland authorities once again reluctant to raise interest rates, many analysts believe the rate of consumer inflation is likely to top 5 per cent later this year before the central bank raises deposit rates. That would put the real deposit rate at minus 2.75 per cent, similar to its level at the height of the 2007 property bull market.

If the government wants to prevent a similar run-up this year, it won't do it by making it harder for buyers to get mortgages. It will have to make property less attractive as a store of value.

That's easy enough to do. The government could slap a capital gains tax on the proceeds from sales of second homes. Or it could impose a punitive annual tax on empty properties to increase the cost of holding real estate purely as a store of value.

Such drastic steps are already under consideration, with both Chongqing and Shanghai said to be preparing pilot programmes.

If inflation rises further, and the weekend's measures fail to stop the run-up in property prices, expect similar taxes to be rolled out elsewhere. That really should halt the bull in its tracks.