But oversupply remains severe in most cities, even the large ones. The demand unleashed by any stimulus policy is expected to be short-lived. So if the government does not launch a fresh stimulus policy in the coming months, the de-stocking process could quickly lose momentum and inventories would climb rapidly.

As demand fundamentals are unlikely to change in the short term and remain highly sensitive to policy signals, monetary policy becomes extremely important in deciding the market's direction.

However, analysts said that a hard landing is unlikely. The most important reason for that belief is that both the central and local governments have a large stake in the steady growth of the market, so they will not allow a meltdown to happen.

The easing of multiple-home purchase restrictions by many cities since May, and the central bank's resort to stimulus policies as the market was at its worst, back up that assumption. That pattern has occurred many times in the past.

Further, although the appeal of real estate is dwindling, it remains an attractive asset class for ordinary households, especially considering their limited investment channels.

Second: Will monetary policy continue to be eased?

The People's Bank of China responded to the protracted economic slowdown with an interest rate cut in November and another last month. The long-term loan rate is now the lowest in a decade. Further cuts in interest rates and banks' reserve requirement ratios are very likely.

Although the easing was not targeted specifically at the property market, it did reduce borrowing costs for developers and homebuyers and thus boost the market outlook. Simply put, monetary policy is a decisive factor in determining whether China has a bullish or bearish property sector.

Third: Will home purchase restrictions be loosened in the large cities?

The market downturn last year prompted most cities that had imposed multiple-home purchase restrictions to loosen them. Only five cities still have such policies: Beijing, Shanghai, Guangzhou, Shenzhen (which are the four first-tier cities) and Sanya in Hainan province.