Gaps widen in property markets

So far, 23 Chinese cities have loosened restrictions on home purchases, accounting for half of the total 46 cities that imposed such restrictions over the past several years. To strengthen the market, local authorities will have to cut their reliance on administrative measures. But given the general market climate, abandoning earlier restrictions will not solve the market's problems once and for all.

Nowadays, the housing markets in Beijing, Shanghai, Guangzhou and Shenzhen are still quite imbalanced. To put the brakes on price speculation, restrictions will likely remain in effect in first-tier cities where real demand is high.

In many of China's less-populated cities though, investment in the housing market is mainly a product of local fiscal policy. This has pushed supplies well ahead of demand. This partly explains why many of these cities are easing or removing earlier curbs.

It bears noting though that the restrictions imposed on these smaller cities were often quite limited to begin with. And due to official negligence, many curbs existed in name alone. The real test for the government will come only after housing inventories are digested and local officials wean themselves away from land transfer revenues.