In the face of an overheating real estate market that is upholding the current economic momentum, China is gently letting air out of the price bubbles.

Coming off a rock bottom earlier this year, real estate prices in major cities have spiraled out of control due to rampant speculation. In response, the government on December 18 made an announcement to raise the down-payment requirement for land acquisitions to at least 50 percent of the total. This was intended to pour cold water on property developers who are paying peak prices for land. But analysts believe the restriction could make less of a difference for deep-pocketed developers cashing in on the housing boom.

On December 9, the State Council ordered people who sell homes less than five years after the initial purchase must again pay a 5.55-percent business tax starting 2010, prompting a new sales explosion as buyers rushed to buy houses before the tax increase takes effect.

The tax increase is believed to have set the tone for a relatively tight policy stance next year, but it is hard to see how policymakers can hit the market hard given its importance as a powerful driving force for the overall economy.

Currently, priority has been given to calming the real estate fever by increasing affordable home supplies, said Qin Hong, a senior researcher with the Ministry of Housing and Urban-Rural Development.