Home prices in the mainland's top-tier cities will keep rising on strong demand, and local governments will be cautious in taking any further tightening measures so as not to crush the market, analysts said.
The consensus was that the authorities did not want home prices to fall in case they triggered a downward spiral ending in a market crash - such as occurred in Hong Kong, Japan and the United States in the past couple of decades - that would bring down the broader economy and increase social tensions.
Home prices in first-tier cities - Beijing, Shanghai, Shenzhen and Guangzhou - soared more than 20 per cent year on year in the past two months despite tougher cooling measures rolled out in November last year.
These cities were under intense pressure from the central government to check housing inflation this year, the media said.
Chen Jie, a professor and senior real estate researcher at the Shanghai University of Finance and Economics, said: "Government measures are effective, but market demand is even stronger. Policy is always a product of compromise, as the government needs to take into account the interest of the majority."
The first-tier cities, which have the country's best infrastructure, education and job markets, would continue to be magnets for businesses, the wealthy and well-educated, as well as migrant workers, driving up demand for homes, said Kenneth Rhee, the chief mainland representative of the Urban Land Institute.
Rhee said those living in flats built about 10 years ago would also like to upgrade to newer or larger homes.
He also said rising relocation costs and low housing density in urban centres were limiting home supply.
"Governments need to focus on increasing the efficiency of land use," Rhee said.
A survey published last month by the Chinese Academy of Social Sciences showed 93.5 per cent of families own a home, and 18.6 per cent have two or more.
One result is that home transactions and prices in third and fourth-tier cities - such as Wenzhou in Zhejiang province, Changzhou in Jiangsu, and Ordos in Inner Mongolia - have either stalled or fallen.
If home prices drop beyond their tolerance, some homeowners might take to the streets.
In the past few years, when developers cut prices, previous buyers in the same projects who paid higher prices often protested and demanded compensation, making the developers rethink the lowering of prices.
To cool the housing market, Shanghai issued a seven-point policy in November including an increase in minimum down payment to 70 per cent for those buying their second homes in the city.
More than a dozen other cities, including Beijing, Shenzhen and Guangzhou, announced similar measures.
But the financial hub, now testing a free-trade zone, did not broaden the coverage of its 0.6 per cent property tax, launched three years ago, to all owners of existing homes. Homeowners will at present only be taxed when they sell homes where the per capita living space exceeds 60 square metres.
A broadening of the tax to other homeowners in the city could trigger asset depreciation and even social unrest, Chen said.
"There is no need to take such a risky action," he said.
For the same reason, the central government has not expanded the trial of the property tax beyond Shanghai and Chongqing after three years and constant media speculation about a possible expansion to other major cities.
Observers agree that if the property tax were to be imposed in Beijing, it would demonstrate how serious President Xi Jinping's government was about containing home price rises.
Lee Wee Liat, the head of Asia-Pacific property research at BNP Paribas in Hong Kong, said Xi must expand the property tax to other cities as a new source of revenue for local governments because the president wanted to cut their reliance on land sale revenues.
Land prices for residential use soared more than 40 per cent in Beijing last year, which should push up home prices in the capital this year.
When their dependence on land sales lessened, officials would step up strict implementation of existing home purchase restrictions this year and next, Lee said.
He said he expected four more cities to impose the property tax this year, without naming them. "But the tax rate will not be very high, and its impact on housing demand will not be huge," Lee said.