Over the past year, authorities have slapped curbs on China's property sector - a major contributor to the broader economy - as the concentration of price surges in the country's wealthiest cities stoked fears of a nasty crash.
The January data released by the National Bureau of Statistics (NBS) suggest regulators are making steady progress in keeping the riskier speculative investors off the property market, with average new home prices in China's 70 major cities up 0.2% month-on-month, slowing a touch from December's 0.3% rise.
That marked the fourth month of slowing monthly growth, with analysts expecting further falls in the year ahead.
"I think home prices have basically peaked. Considering the yearly growth is still strong, prices are likely to keep falling this year," said Zhou Hao, a Singapore-based economist at Commerzbank.
Compared with a year ago, home prices still rose 12.2%, just off December's 12.4% gain.
In China's biggest cities, Shenzhen, Shanghai and Beijing prices rose 18.2%, 23.8% and 24.7%, respectively, from a year earlier, but Shanghai and Shenzhen's monthly pace slowed as local governments' tightening measures knocked demand.
All the same, a more subdued housing market may mean China will be even more reliant on infrastructure spending to boost economic growth. That may pose challenges as a closer look at China's only shrinking provincial economy reveals increasingly diminishing returns from such a state-driven policy highly reliant on borrowing.
Indeed, China appetite for cheap credit has fed an explosive growth in debt over recent years, prompting a warning from analysts and the likes of the International Monetary Fund of a banking crisis that could ripple across the global economy.
China's debt to gross domestic product (GDP) ratio rose to 277% at the end of 2016, from 254% the previous year, UBS analysts said in a recent note.
Moreover, some analysts caution that downward home prices are likely to have a negative impact on producer prices, which is at near six-year highs thanks to record prices in raw materials, affecting firms' ability to service their mounting debt.
Such a scenario could spur a vicious cycle of low property investing feeding into a slowdown in demand across the economy, which grew 6.7% in 2016 - the slowest rate in just over a quarter of a century.
The government has been fretting over fast-rising leverage and the risk of asset bubbles in an economy that has recently shifted to a lower gear, prompting a raft of restrictions on purchases and lending in more than 20 cities since October.
Banks in some big cities such as Beijing have started lowering discounts on lending rates for fist-time home buyers since this year, joining recent steps to curb financial risks stemming from loose credit conditions.
That mirrors moves by the People's Bank of China (PBoC) since late January to a tightening policy bias over the coming year as it tries to curb risks from the balooning debt.
Last week, the PBoC singled out corporate debt and property bubble risks in its latest monetary policy implementation report.
Nonetheless, Chinese banks extended 2.03 trillion yuan (US$295.74 billion) in net new yuan loans in January, the second-highest monthly tally on record, while the overall financing numbers appeared to indicate a surge in less-regulated shadow banking activity, possibly in response to the central bank's tougher stance.
"China is getting increasingly less bang for its buck as credit flows toward unprofitable projects and unproductive assets such as real estate, which generate little or no return," London-based consulting firm Fathom Consulting said in a recent research note. - Reuters