The Central Economic Work Conference, in which the country's major economic priorities for next year were mapped out, required "rational guiding and effective regulation" in the real estate market.

"The central bank's comment on the real estate market, therefore, can be seen as a follow-up gesture," said Chen.

But this comment may be more than a gesture, according to Han Meng, a researcher at the Institute of Economics of the Chinese Academy of Social Sciences (CASS).

Macro-economic regulation has been in place for many years, but some problems still remain.

"The central government wants to maintain rational economic growth, but local governments want to further expand their investment scale, which pushes up housing prices," said Han.

Despite the macro-economic regulation, the price of new houses in 70 major cities rose 6.6 percent year-on-year in October. From January to September, house prices in Beijing rose 10.9 percent year-on-year.

The warning, released on the day the Central Economic Work Conference was concluded, may be a well-timed step by policy-makers to show where they stand on the issue, said Han.

However, Chen said the policy-makers will not take action that may lead to drastic fluctuations in the real estate market.

The economy will maintain its high growth rate next year, considering the current momentum, and the renminbi may continue to appreciate, said Chen. Moreover, domestic banks, which are weak in terms of financial innovation, have few good options other than individual housing lending. As a result, it is hard to control such lending to the real estate sector, said Han.

There is no sign that "hot money," or speculative capital, is retreating from China, Chen said. This indicates that speculators are still optimistic about China's housing market.

Although the market needs to be properly managed, Wang Lina, another CASS researcher on real estate, said that the warning does not represent a judgment by the central bank that the real estate market has entered a dangerous stage.

1

2

(For more biz stories, please visit Industry Updates)