To temper volatility, the land leasehold payment method could be switched from a lump-sum leasehold fee to annualized installment of land rents plus property tax.

More financing options could be offered for affordable housing development (that is, tax rebates or exemptions to developers building lower-price housing projects, low- to no-interest loans for low-price housing).

The management of land supply could be enhanced.

And the successful lessons of government provision of public housing in Singapore and Hong Kong could be emulated.

But public sector measures will not suffice unless the incentives are right in the private sector. The mass-market housing reportedly accounts for only 10 percent of total residential sales. In the current business model, high margins derive from a very narrow high-end segment of the market. This made sense in the early days of Chinese real estate boom when only a few wealthy people could afford a home.

Today, far more Chinese are willing to and can buy a house. The changed situation demands a new business model, which can be based on the broad middle-class segment of the market. Margins will be lower, but the unit volume can be a lot higher.

The challenge is to introduce market-driven incentives for local governments and real estate developers to promote affordable mass-market housing. Aside from residential units China's property market comprises commercial, office, industrial and retail segments. And each has felt the impact of the global economic crisis, though differently.

The commercial property market is closely associated with foreign investment and international trade. In China, multinationals account for 30-70 percent of tenant demand in office properties. As a result, this segment was hit hardest by the collapse of exports. With recovery, the office market will thrive again, but that is more likely to happen in second-tier cities.

In contrast, the retail segment has been relatively steady because, in the absence of high unemployment, people continue to shop. Still, foreign retailers in China have opted for more cautious approaches to expand, because of global stagnation.