The real estate environment in China can be described as a "dual market:" First-tier cities are moving to cool their overheated property markets, while other parts of the country are struggling with excessive inventories.

New measures rolled out by the governments of Shanghai and Shenzhen recently are expected to rein-in speculation and mitigate risks for a bubble.

Zou Linhua, associate researcher at government think tank the Chinese Academy of Social Sciences (CASS), was upbeat that home prices in top-tier cities, which also includes Beijing and Guangzhou, will increase at a slower pace.

Cities beyond the "big four," however, have different stories to tell.

China's property market is showing a "divided" picture, with high inventories in smaller cities and a shortage of housing in big ones, leading to structural overcapacity across the whole sector, said Zou.

While most second-tier cities, such as Hangzhou and Nanjing, also saw home prices rise, but at a slower pace, home prices in most cities of third-tier and below are stagnating or falling due to aging, high inventory and faltering industrial restructuring, Zou said.

In February, new home prices in Shanghai jumped about 20 percent year-on-year, while in Shenzhen, prices soared 72 percent.

On Friday, municipal governments of the two cities moved to stop this trend from continuing.

Second home buyers in Shanghai must now put down a 50 percent deposit on a house, compared to 40 percent previously, to qualify for a mortgage. This minimum down payment rises to 70 percent if the home surpasses the criteria for an "ordinary house." The new rules also make it harder for non-residents to buy homes in Shanghai.

Late Friday night, authorities of Shenzhen announced similar measures.

Zhang Dawei, chief analyst at Centaline Property Agency, said it was probably just a matter of time until Beijing and Guangzhou rolled out similar measures to its counterparts.

Measures to be considered by the two major cities could include tighter regulations on estate agents, higher taxes, tighter credit line for second homes and more land supply, said Zhang.

New home prices in Beijing increased 12.9 percent in February from a year ago, and that of used homes soared 27.7 percent year on year. The indicators for Guangzhou were 11.8 percent and 14.7 percent.

Zou of CASS attributed the soaring home prices partially to supportive macroeconomic policies such as an easier monetary policy, adding that the new measures would help temper the growth of demand and encourage potential buyers to take a "wait and see" attitude.

Moreover, the sharp price increases in the first quarter have already unleashed some of the price-rise momentum in the cities, Zou said.

The policy tightening is seen as a response to the central government's calls for differentiated measures according to each city's market situations to regulate and control the property market.

"We will [...] adopt different policies in different cities as appropriate to their local conditions, in order to cut housing inventory and promote stability in the real estate market," said the government work report published in early March during the annual parliamentary session.

For the big cities, the authorities should increase land supply while reining in speculative demand; for the smaller ones, local governments should take various measures to attract more buyers, Zou said.

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