Guangzhou's latest property curbs will dent transactions and prices, but probably only for a few months, and will need to be reinforced by further measures, analysts said.
One of the main reasons for this is that home purchasers are scared about being priced out if they do not buy now.
In the southern city's latest attempt to put a lid on soaring home prices, it tightened home purchase restrictions on non- local buyers by ordering them to have paid personal income tax or social insurance bills for three consecutive years, up from one year previously.
"The curbs are mainly targeting property investors and speculators," said Lin Jianhui, a branch head with China Index Academy, the mainland's top private real estate data provider and research institute. "But demand from end-users eligible for purchases is also very strong."
Three more cities - Xiamen, Nanchang and Shenyang - joined Guangzhou on Monday, announcing similar measures to curb price rises.
The city has clarified that non-locals who signed contracts before the announcement would not be affected, after media reports that some buyers who had paid taxes and insurances for one year, but not three, might have to step away from sealed deals.
Those who now become unqualified buyers are turning to a grey market - hotel rooms or loft apartments that are not subject to purchase restrictions.
The disadvantage of such units is that the ownership term is shorter, often 40 or 50 years instead of 70 years for standard homes, and users need to pay higher utility prices.
Olympic City Plaza, a loft apartment project launched on Saturday, sold 70 per cent of 864 units available that day, for revenue of 800 million yuan (HK$1 billion).
However, the launch of sales at Tagen Uptown, a housing project targeting end-users, was postponed indefinitely.
Home prices in Guangzhou were up 20.7 per cent in October from a year earlier, official data showed - the biggest increase so far this year and contrasting with the slowing economic growth.
Guangzhou became the last top-tier city - others include Beijing, Shanghai and Shenzhen - to roll out fresh curbs after home prices surged beyond top leaders' comfort zone.
"The government [in Guangzhou] will probably need to issue more measures early next year, particularly on the supply side," Lin added. "Some buyers are panicked [by soaring home prices] and are eager to buy now."
A blogger named "Mr-Mike Xiaomai" from Guangzhou epitomises that concern.
"With Guangzhou's six-point measures, deposits for second homes are raised to 70 per cent from 60 per cent. It will have no effect on wealthy locals who are hoarding flats, but life for end-user mortgage slaves will become even more miserable. Home prices will start to surge afresh," the blogger said of the latest measures.
If the experience of other cities is anything to go by, he may be right. Beijing imposed the harshest home purchase restrictions seen since April 2010 - demanding that non-locals have paid taxes and insurance bills in the past five consecutive years.
Home prices fell by a fifth in May from April, but gradually perked up and eventually exceeded the April level after nine months.