Property transactions in China have been robust. In the first seven months of 2009 sales are up 60.4% year-on-year in value and 37.1% in terms of area, according to Sherman Chan, a Sydney-based economist at data provider Moody's Economy.com.

Strong lending in the first half of the year has caused a liquidity flood, Chan says, while investor confidence has also recovered as the economy rebounded quickly from the downturn. Although much of the speculative capital has likely entered the stock markets, some is expected to have flown into real estate.

Despite seemingly strong market sentiment, Chan says the stark contrast between price growth in equities and real estate suggests investors remain cautious. Liquidating stock holdings is much easier than converting property into cash. Investors have likely favoured the stock market because of the ease in realising gains or exiting due to risk aversion.

Although the authorities have recently reassured the public that fiscal and monetary policy will remain accommodative, a tightening of policies may commence by mid-2010 as inflationary pressures return, Chan says. Thus, Chan notes that until the government's policy direction is perfectly clear, investors may maintain a cautious attitude towards property investment.

"The relatively modest rise in property prices so far this year suggests that a potential real estate bubble is not yet a pressing concern," Chan says. "China is likely facing a new-property glut, which is keeping a lid on price pressures despite a pickup in demand."