China is struggling to find a balance between reducing the country's housing inventory and curbing speculation. China's central bank has firmed up down payment requirements to kick speculators out of the housing market.

The PBoC's regional office in Jiangsu province is urging banks to verify the sources of buyers' down payments, and the buyers' identities. Banks are also required to reject deals under any kind of developer promotions that reduce or eliminate down payments. Any misconduct during the application of mortgage loans by prospective home buyers also will stay in their credit records.

The policy still favors REAL first time buyers instead of those who have purchased homes before.

Prices in Shanghai saw a surge of more than 20 percent in February from a year ago. That came after the government's housing de-stocking measures. A major challenge for Beijing is the price gap between big and smaller cities.

The problem is a headache for policy makers because money is flowing into real estate from equities after last summer's stock market crash, and always skips the lower-tiers cities in favor of Shenzhen, Shanghai and Beijing.

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