BOAO, Hainan - The Chinese property market might not crash precipitously but is becoming tricker, more volatile and sophisticated.

Will property prices fall over 80 percent this year? Developers attending the Boao Forum for Asia say no, but volatility is notoriously unpredictable.

No specific controls or fine-tuning were mentioned in the government work report to the annual parliamentary session in March, but the agenda touched upon finance, taxation and land reform, all of which will hit the real estate market.

The effect is already being felt. Housing prices lost steam in February when new home prices rose 8.7 percent year-on-year, down from 9.6 percent in January.

Market divergence

Regional divergence between first- and second-tier cities is becoming an issue. Discounts in some eastern cities last month caused jitters and worries of an imminent crash.

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A supply-demand imbalance will continue to prop up the housing price in resource-rich cities, and markets in first-tier cities will continue to outperform others, said Zhang Yuliang, chairman of developer Greenland Holding Group. Prices in Hebei Province increased over 4 percent last month due to dubious reports that the city will share some of Beijing' s functions and sectors as a part of a metropolis development program.

For cities with little industrial support and poor infrastructure, you can't expect prices to rise much, and for sure, some will fall. We will not see the crazy rises of 2013 again, as that irrational period has gone, Zhang said.

The divergence will also be felt in different areas of one city, and different kinds of properties, said DESEA Investment Holding Group CEO Li Xiaoming.

Segmentation will be a good thing as that is how a mature market functions, and it will force buyers to be more rational and market-minded, said Jia Kang, director of the Research Institute for Fiscal Science at China's Ministry of Finance.

Government's balancing act

Despite the market's new "decisive role", the government has an obligation to help the underprivileged, especially during transition. Detailed plans to build affordable housing for the low-income community and coordinating low rent housing with public housing will help.

A new property tax is on the horizon to stymie speculation, and banks have made it harder to get home loans. Most Americans buy houses for residential purposes rather than speculation, said Chris Marlin, president of Lennar International, "things will go wrong if people regard properties as an ATM".

The new tax may reduce levies on property development and transactions, but may increase tax on ownership, at the high end, said Jia Kang.

China should not follow the US by taxing all properties; a more detailed and differentiated taxing policy based on a threshold of living space might be more acceptable in the transition period, Jia added.

Another issue to be dealt with is 70-year tenure on property, as the land underneath belongs to the government. Feasible solutions involve a procedure for extending tenure, Jia said.

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