Authorities are working on detailed rules to cool down the property market in Shanghai, which will be more strict than central government policies, a municipal official said.

Chen Qiwei, a spokesman for the Shanghai municipal government, did not preclude the possibility of levying property tax when asked about this issue at a press conference on Friday.

"Shanghai will take more strict measures in line with the central government policy," Chen said, adding that more efforts will be made in building economically affordable houses and cracking down on speculative house purchasing.

The property tax will help curb property speculation in the short run but it will hardly stop rising real estate prices because of limited supply and excessive liquidity, said Sabrina Wei, head of research at property consultancy DTZ North China.

"In the long term, it is mainly aimed at increasing the fiscal income of local governments, thus reducing their reliability on land revenues - which is a major factor in shoring up high property prices," Wei said.

But officially levying a new tax will still require approval from the State Council, or the country's Cabinet, analysts said.

China already had property tax regulations on profit-making properties, excluding residential buildings, in 1986.

"A new definition of profit-making properties, say, including second or third apartments of a family, still needs the nod from the State Council," said Edmund Ho, managing director of DTZ North China.

"The central government will probably issue a framework, leaving local governments to formulate detailed rules depending on their property markets."

Earlier reports said that Beijing, Shanghai, Chongqing and Shenzhen will be the first batch of cities to collect property tax on a pilot basis. But so far, Shanghai is the first city to respond to the report officially.

Chinese government efforts to rein in soaring property prices will meet targets within the year because of repressed demand from potential buyers and increasing supply in the second half of the year, an official report said on Friday.

"With a sound implementation of recent tightening policies on real estate, speculative purchase has been obviously restrained with self-use buyers taking a wait-and-see attitude, thus improving demand and supply imbalances," said Chen Huai, director-general of the policy research center under the Ministry of Housing and Urban-Rural Construction.

The report, compiled by the center and the China Index Academy, is the first policy revaluation after the government launched its most rigorous of real estate policies since mid-April.

The price of properties will drop after plummeting sales and shrinking supplies but the bottom line in prices depends on property developers' land cost, the report said. Property sales of pre-owned houses in Beijing this month dropped by 80 percent from April's figures, the Beijing Real Estate Transaction website reported.

Nearly 40 percent of Shanghai's real estate brokerage firms did not handle any transaction on pre-owned homes this month, said Hong Shirui, managing director of Shanghai Hanyu Property Co Ltd.