Housing prices to diverge

Tighter credit will help contain price rises, but demand-supply conditions will remain the main driver.

"Although housing bubbles are more noticeable in first-tier cities, the shortage of supply implies that it takes time for markets to correct. In some smaller cities with more abundant supply, house prices may start to decline in 2014," Zhu added.

China Vanke Co Ltd Vice-President Mao Daqing expressed a similar view. Although first-tier cities experienced a strong price rebound in 2013, the risks of fluctuations in those cities remain controllable, compared with those in small towns.

The forecast is based on the assumption that housing policies will not change significantly in 2014.

In recent months, first-tier and some second-tier cities where housing prices have risen faster introduced new tightening measures.

These policies mainly focus on tightening purchase restrictions and imposing tougher mortgage conditions, such as increasing the down payment requirement from 60 percent to 70 percent for mortgages on second residences.

These measures have been in place for several years, and the marginal impact has been limited, said Zhu.

"In addition, supply-side measures seem to lag. It is unlikely that a real estate tax will be expanded nationwide in 2014, and the ambitious affordable housing plan has had little impact on the private housing market," said Zhu.

In the long term, even if a correction starts for housing prices, it is unlikely to lead to a housing crisis or even a financial crisis as in many other countries, Zhu stressed.

"This is because housing bubbles in China are mainly in first-tier cities, which represent only a small portion of the national market," said Zhu.

In 2012, the four first-tier cities - Beijing, Shanghai, Shenzhen and Guangzhou - only accounted for only 4.7 percent of the total population and 3.8 percent of home transactions, according to JPMorgan.

"In contrast, housing in other cities is still affordable in general. Hence, the housing market at a national level is more likely to return to a normal cycle rather than fall into a collapse scenario as markets have feared," said Zhu.

According to the China Index Academy, sales in terms of floor space will rise 5.5 to 7.8 percent throughout the year, compared with 73.8 percent in first-tier cities just so far this year.