However, many analysts fear a repeat of the scenario witnessed in Japan during the 1990s, the country's "lost decade", when it endured a long period of recession after a massive collapse in house prices.

"If the housing bubble burst in China it would affect a lot of industries dependent on a booming property sector. People won't buy furniture and other consumer products," said management consultant Zhang. "It wouldn't necessarily make houses more affordable, either. People would lose their jobs and the poor would actually get poorer. The wealth gap would widen as the rich would be able to preserve their wealth."

MacDonald at Savills, however, said there was no need to panic about the immediate effect of the recent purchases on house prices.

"It will take two or three years for this land to be developed and the properties go on sale. By that time, the property market could look very different from the way it does now," he said. "Average incomes are growing 10 percent a year, so prices can go up more than 30 percent over that time and the affordability ratios will remain the same."

Meanwhile, SOEs have been warned they may regret their "land king" rush, with analysts predicting they will one day have to pay for their excesses.

"They will regret paying these high prices and history will prove they were not acting in a rational manner," said Ronnie C. Chan, chairman of Hong Kong-listed Hang Lung Properties Ltd.