"Frankly speaking, for such a high unit price, there is not much room for value appreciation, but it seems that those investors just want to find a place to put their money," said Zhou Tao, a sales consultant with Phoenix Island.

His thoughts could be right. Behind the property price surge in China's major cities is a rapid growing rich stratum with ballooning wealth and a growing fear of imminent inflation. Also, the economy is awash with cash after banks issued an unprecedented flood of loans to help combat the financial crisis.

According to a report jointly released by Merrill Lynch Global Wealth Management and Capgemini, China has surpassed the United Kingdom to become the world's fourth-largest high-net-worth individuals (HNWI) market. HNWI refers to people with net assets of no less than $1 million, excluding their primary residence and consumables. In China, there were an estimated 364,000 HNWIs at the end of 2008, and their combined wealth stood at $1.7 trillion.

With few investment channels in China, property is an alluring target. A recent survey by the central bank shows that property is Chinese citizens' first choice for wealth management, followed by funds and stocks.

"The property price in China's first tier cities has been unreasonable, making those who really need an apartment to live beyond affordability. For rich guys, housing has been a way of saving," said Grant Ji, director of Savills (Beijing), a UK-based real estate service provider.

"Though property investment is an ideal channel to fight against inflation, an unreasonably high price will also make the investment a failure once the market collapses," he added.

The unbridled rise in property price has prompted the government to flex some muscles.

Just a few days after the cabinet announced its plan to curb "excessive" growth of property prices in some cities, five ministers set a new threshold for land purchase, requiring property developers to pay 50 percent of the total price as the downpayment. Meanwhile, the Ministry of Housing and Urban-Rural Development said it would construct 1.8 million low-rent houses and 1.3 million economically affordable homes in 2010 for low-income families.

The policy objective of the central government is to deflate potential bubbles and send early warning signals to investors and property developers, said Michael Wu, director of the Fitch Rating Asia Pacific corporates team.

"Without more substantial tightening policy measures, market sentiment should be relatively stable, and property prices are likely to move within a tight range. However, a strong performance in sales and profit margins is unlikely to recur in 2010," he added.

"Compared with two decades ago, banks now have better risk control schemes. The China Banking Regulatory Commission also has stricter supervision over potential risks," Huang said.

But Yao admitted the flood of investors from outside the province was a cause for concern. A recent survey by Midland Realty showed that more than 50 percent of property purchases in the major cities were for investment purposes. The money from outside has shored up the price and fueled worries about a bubble.

Yu Zijian, deputy general manager of R&F Hainan Real Estate Development Co Ltd, said more than 90 percent of buyers of their project were outsiders, coming particularly from affluent regions including Beijing, Shanghai, Zhejiang, Chongqing, Chengdu and the Northeastern area.

Phoenix Island, a luxury residential project in Sanya, received more than 100 orders on the first day of sales. The unit price of the project ranges from 50,000 yuan to 100,000 yuan per sq m, making it comparable to that of high-end properties in Beijing and Shanghai.

"Frankly speaking, for such a high unit price, there is not much room for value appreciation, but it seems that those investors just want to find a place to put their money," said Zhou Tao, a sales consultant with Phoenix Island.

His thoughts could be right. Behind the property price surge in China's major cities is a rapid growing rich stratum with ballooning wealth and a growing fear of imminent inflation. Also, the economy is awash with cash after banks issued an unprecedented flood of loans to help combat the financial crisis.

According to a report jointly released by Merrill Lynch Global Wealth Management and Capgemini, China has surpassed the United Kingdom to become the world's fourth-largest high-net-worth individuals (HNWI) market. HNWI refers to people with net assets of more than $1 million, excluding their primary residence and consumables. In China, there were an estimated 364,000 HNWIs at the end of 2008, and their combined wealth stood at $1.7 trillion.

With few investment channels in China, property is an alluring target. A recent survey by the central bank shows that property is Chinese citizens' first choice for wealth management, followed by funds and stocks.

"The property price in China's first tier cities has been unfeasible, making those who really need to buy an apartment in which to live beyond their affordability. For rich guys, housing has been a way of saving," said Grant Ji, director of Savills (Beijing), a UK-based real estate service provider. "Though property investment is an ideal means with which to fight against inflation, an unreasonably high price will also make the investment a failure once the market collapses," he added.

The unbridled rise in property price has prompted the government to flex some muscles.

Just a few days after the cabinet announced its plan to curb "excessive" growth of property prices in some cities, five ministers set a new threshold for land purchase, requiring property developers to pay 50 percent of the total price as the downpayment. Meanwhile, the Ministry of Housing and Urban-Rural Development said it would construct 1.8 million low-rent houses and 1.3 million economically affordable homes in 2010 for low-income families.

The policy objective of the central government is to deflate potential bubbles and send early warning signals to investors and property developers, said Michael Wu, director of the Fitch Rating Asia Pacific corporates team.

"Without more substantial tightening policy measures, market sentiment should be relatively stable, and property prices are likely to move within a tight range. However, a strong performance in sales and profit margins is unlikely to recur in 2010," he added.