NOT SILVER BULLET

The "house-for-hukou" policy proved to be quite effective in 2008 when cities including Chengdu and Tianjin offered preferential policies to boost the then ailing property market dented by the international financial crisis.

However, the downturn now is more of a result of oversupply and shrinking demand due to previous intensive house-buying, a tight credit environment, as well as expectations that prices will fall, said Ni Pengfei, a senior researcher on urbanization and property with Chinese Academy of Social Sciences.

Meanwhile, the reform may further aggravate regional property market divergence, noted Li Guozheng, marketing director of central China with China Index Academy, a property market research institute.

Li explained that household preferential policies around the Pearl and Yangtze river deltas may draw more people to migrate from central and west China, further depressing property prices in third- and fourth-tier cities.

An urbanization plan was unveiled in March including hukou reforms to gradually grant 100 million migrant workers permanent urban hukou permits by 2020, which many believe will lead to long-term home-buying demand.

"Hukou reform is just a natural part of urbanization, not a regular property market adjustment tool, and its influence is limited in the long term and should be conducted gradually in line with a city's infrastructure and social services development," Li said. "The way out lies in property developers' timely and coordinated strategy adjustment towards market changes instead of administrative tools."