Inventories built up in the past decade and a flood of cheap state-backed affordable homes will reduce the possibility of a strong rebound in Beijing home prices, even if policies are relaxed further, industry experts said. The mainland market has been in a downturn since February due to tight credit and oversupply. Local governments started to loosen home purchase restrictions from June, and they now only remain in the four first-tier cities of Beijing, Shanghai, Shenzhen and Guangzhou. The central bank relaxed mortgage rules in September and followed that with an interest rate cut in November. Such measures have stimulated transactions and slowed home price declines across the mainland. The industry is now looking to first-tier cities for signs on how soon the market will recover. The majority of small cities are expected to be mired in a housing glut for a much longer period of time. "Home prices are high and unaffordable to those who haven't bought yet," said Zhou Hao, an economist at ANZ in Shanghai. "So the marginal impact of policy relaxation is now small." The central bank still has many cards in its hand, if needed, to stimulate housing demand, such as lowering down payments, pushing banks to give first-home buyers a 30 per cent discount on mortgage loans - up from an average discount of less than 10 per cent now - and further cutting mortgage rates. Policymakers in Beijing also have more options. Media reports have speculated that the capital may exempt home sellers from a 20 per cent capital gains tax if they sell homes after two years, instead of five years now. Consultancy E-House China said in a recent report: "There is little chance for first-tier cities to remove home purchase restrictions." Such cities had seen the mainland's strongest rebound momentum, with supply and demand basically balanced, making the relaxation of purchase controls unnecessary, it added. But there has been a flurry of reports recently about an imminent tweaking of home purchase restrictions in Shanghai, Shenzhen and Guangzhou, without official confirmation. E-House data showed Beijing had 11.3 million square metres of unsold homes at the end of last month, which would take 13.9 months to sell down. Official data shows Beijing has completed more homes than it has sold in eight of the past 10 years, yet prices have kept soaring, with only a few brief dips due to policy tightening. As part of efforts to help those priced out of the market, Beijing has vowed in recent years to beef up the building of government-subsidised homes. The city invested 54.1 billion yuan (HK$68.2 billion) in the first 11 months of last year to finish the construction of 107,432 units of subsidised homes and start construction on 100,811 units, all exceeding annual targets. With these homes coming on to the market to be either rented or sold to low-income families, and developers rushing to launch new projects early this year, downward pressure on prices would build, analysts said. However, some developers are still betting on a possible strong rebound in Beijing's home prices this year, as land prices have continued to surge and the city authorities sold less floor space for residential property construction last year, limiting supply further down the road.