More mainland cities saw home prices rise last month, leading to concerns there could be further government measures to cool the housing market.
Prices climbed in the most cities in 20 months with 54 of the 70 cities reporting price gains, according to data tracked by the National Bureau of Statistics. This compared with 53 in November.
Prices fell in eight cities, according to the government's official data.
"In the light of the rise in prices and sales volume in the past two months, the government could introduce a new round of measures to cool off prices again," said Zhang Dawei, the research director at Centaline China.
Home-seekers have been returning in anticipation of a better market outlook, according to Zhang.
The biggest price rise in new private homes was in Guangzhou, with a 1.2 per cent increase from November. It was followed by Shenzhen's 1.1 per cent increase. New home prices in Beijing and Shanghai rose 1 per cent and 0.7 per cent respectively.
"Strong sales in the past several months have turned home buyers more optimistic on the housing price outlook. As a result, an increased number are preparing to buy a home sooner rather than later," said Alan Jin, a property analyst at Mizuho Securities Asia.
"Trade-up" demand has been revived, and people are looking for larger units, said Jin.
For example, prices of homes sized 90 square metres or below went up 1.2 per cent in December. But for homes sized between 90 and 144 square metres, prices gained 1.3 per cent.
In the second-hand market, 40 cities saw prices rise, 26 cities reported price declines, and prices in four cities remained the same.
"We expect the strong momentum in China's housing market seen since mid-2012 will continue well into 2013," Jin said.
According to Jefferies Equity Research, sales volumes in mainland cities kept rising.
In the week ended January 13, 30 out of 35 key cities Jefferies tracks experienced week-on-week transaction volume growth. In the past four weeks, 34 of 35 cities saw year-on-year volume expansion.
Average selling prices in major cities increased 5 per cent year on year, it said. In terms of inventory period, Jefferies estimates it takes 8.3 months (compared to 8.4 months last month) on average for clearance based on the current selling pace.
Recently, the chief accountant of the State Administration of Taxation has highlighted that the government needs more time to study expansion of property, while the decision-making process continues regarding which cities should be included.