According to figures compiled by Head-Join (China) Real Estate Consultant Institution, home prices in Hangzhou fell 9.4 per cent to an average of 9,291 per square metre in September from 10,172 yuan per square metre in July - two months after the austerity measures took effect.

Hangzhou residential prices hit a peak of 10,441 yuan per square metre in January this year, up 34 per cent from February last year.

In comparison, Shanghai home prices have fallen as much as 30 per cent in rural areas after the central government in May imposed measures to check rising prices.

Mr Yeung said residential prices in Hangzhou were not falling much as there is still strong demand.

'Hangzhou is next to Shanghai. Many Shanghai people are buying houses in Hangzhou. More importantly, there are a large number of residents from Zhejiang province who want to have a house in the provincial capital.'

On the other hand, Hangzhou Land and Resources Bureau recently announced another three residential development sites for public tender, with a total area of more than 100,000 square metres.

'The bureau will announce more land for sale,' said Mr Yeung. 'The government has just finished another investment promotion.'

So far this year, 29 sites are available for public tender with more than half of them for residential development.

Early last week, two Hong Kong-listed developers, Kerry Properties and Hangzhou-based Greentown China Holdings won government tenders for two sites in Xiacheng district and Jianggan district, respectively.

Last year, China Resources Group paid 1.1 billion yuan for a 149.18 mu (99,450 square metres) site for a residential, office, retail development in Jianggan district. A few months later, Kerry Properties (Hangzhou) paid 2.46 billion yuan for a 98.91 mu site for retail, office, municipal facilities.

Earlier this year, CapitaLand from Singapore and China Vanke, one of the three biggest developers in the mainland, joined in the bidding for public land.

'The land price in Shanghai is too expensive,' said Mr Yeung, 'And there is less and less land for development.'

According to figures from the Hangzhou government, the average accommodation value from land sales rose from 1,401 yuan per square metre in January to 10,870 yuan in September. The variations are subject to the location of the site being put up for sale.

Most of the big universities in Zhejiang province are located in Hangzhou, including Zhenjiang University, one of China's best.

Zhejiang is also one of the richest provinces, with gross domestic product growing at 13.9 per cent in the first three quarters this year. Hangzhou recorded GDP growth in the same period of 15.2 per cent. China overall grew 10.4 per cent.

'There are many rich people all over Zhejiang province as there are many private enterprises here,' said Fang Fang, general manager of Head-Join (China) Real Estate Consultant Institution. 'They like to buy houses in Hangzhou and they are buying for their own use, not for speculation.'

Mr Yeung said many parents are buying houses in Hangzhou before their children go there for college.

'There are also people buying houses here to live after retirement,' he said.

The strong demand supports the prices, attracting many developers who do not find many chances in Shanghai, where prices are falling.

'A lot of people in Shanghai are buying for speculation,' said Ms Fang, 'Thus the macro-economic policies on property have an impact on flat prices. But the story in Hangzhou is different.'

Every year many students graduate from universities in Hangzhou and many of them will buy houses after working for a few years. 'One of the six policies issued by Beijing, requiring 70 per cent of total development gross floor area should be units of 90 square metres or less, happens to meet the demand from graduates,' said Ms Fang.

Big developers are taking their chances to fill this gap by buying up more land, while small and mid-size developers are facing mounting pressure.

'It's a matter of capital,' said Ms Fang. 'Developers with much money and not much land bank tend to buy aggressively.'