BEIJING - Peter Cao, the chairman of the board of directors of Yadong International Real Estate Development Company, has been closely following the impact of the purchasing restrictions on China's housing markets unveiled in February in many cities.

He remains optimistic.

"The purchasing limits are one of the Chinese government's strictest policies to cool the housing markets, but it's not scary," Cao said.

"The policies deliver the determination of the government, but as for the policy's real impact, we'll have to wait and see."

China's State Council issued a series of regulations on Jan 27, stipulating that cities, especially those with high housing prices, must issue detailed purchasing restrictions on housing by the middle of February.

Beijing unveiled the toughest measures ever on Feb 16, prohibiting home purchases by non-local registered families who have no proof of social security contributions or income tax payment in the Chinese capital for five straight years.

Following Beijing, more than a dozen Chinese cities, including Shanghai, Tianjin and Shijiazhuang, have capped the number of apartments a family can buy, thereby raising the level of difficulty for non-residents to buy apartments for investment.

Home sales fell sharply after the restrictions were made known. Take Beijing for example, the city reported sales of 3,436 new homes in February, down 70 percent from the sales figure in January, according to Beijing's real estate transaction management website run by the municipal commission of housing and urban-rural development.

Existing home sales slumped 64.3 percent month on month to 8,376 units in February, the lowest volume in 25 months.

Real estate developers easy on purchase restrictions

Real estate developers have remained calm while they wait to see further results.

Prices of more than 90 percent of housing projects remained stable last month, said Zhang Dawei, an analyst with the Centaline Property in Beijing. Centaline Property projects no large correction in housing prices in the city as supply remains at low levels in the first half of 2011, he said.

"I believe new policies will come out within one or two years to substitute the restrictions, so many real estate developers have adopted a wait-and-see attitude, especially those who have strength,"  said Zhao Ertian, a real estate agent for Hebei Guoda Real Estate Agency.

Housing prices may soar when the new policy comes out, said Zhao, "because now, people who have the demand will wait to see whether the property price will fall or not. Once the policy changes, people who have waited will fear that the price will go up and they'll start to buy.

The purchasing limits will not curb the real demand. So by then, when the real estate developers are eager to sell and make a profit after the off season, the housing price will soar."

"Besides waiting now, we have other methods to pass this slack season,"  said Wang Shiqing, the sales director of Hebei Yixing Real Estate Company.  "For example. we change some of our home projects to office buildings."

"It is very flexible as far as real estate sector is concerned, some business people may change industries when they think the policies are not favorable at present, but they may come back when the policy changes,"  Wang added.

Property taxes -- as a way out

Related readings:  Property markets in Beijing, Shanghai cooler  Real needs of housing market  Beijing land sales down in January-Feb  Beijing home sales slump in February

Chinese Premier Wen Jiabao on Sunday reiterated his determination to rein in the country's soaring housing prices during an on-line chat with the public.

Many experts suggest using a property tax as a way to cool the market, in the long run.

"How will the purchasing limits affect the market? We can't tell now. People all have to wait and see. But I believe a property tax together with the government subsidized housing projects would be methods to solve the problem in the long run,"  said Liang Yuemin, a deputy researcher for Hebei Provincial Academy of Social Sciences.

Zhu Zhongyi, the vice director of the China Real Estate Association, also said that a properly levied property tax could solve the problem in the long run, though the introduction of trial property taxes in Chongqing and Shanghai have had very limited impact.

"It can't bring big changes at present, but it does send the right signal," Zhu said.