Zhang Linsheng took a deep breath before swiping his debit card for Rmb 1.8 million ($294,000), the down payment on his new Shanghai apartment. "It's the most I've ever paid at once," he said.
The real estate agent, wearing a pink shirt and silver tie, chuckled: "His down payment is higher than the entire cost of my home. But there's no point in waiting. Prices are only going to go up."
(Read more: Does China face more property curbs?)
Mr Zhang, a 33-year-old clothing trader from southern China, knew that from experience. He had waited to buy a home until now and he regretted it. "Property prices have been increasing more quickly than my income, so it's like all my work has been for nothing."
Over the past month he finally decided to take the plunge. He checked out dozens of new developments in and around Shanghai, eventually settling on Majestic City, a large residential complex near the central train station.
Mr Zhang is far from alone in entering the property market. Housing prices in China's biggest cities, including Shanghai, soared nearly 20 percent year on year in August, the steepest increase on record since the government changed the way it calculated prices nearly three years ago.
On the surface, the price appreciation is a simple product of supply-and-demand dynamics. Chinese developers slowed their pace of construction over the past two years as financing became more expensive and the economy weakened, so the supply of new homes coming on to the market has leveled off. But the number of people looking to buy homes, especially in China's biggest cities, has continued to expand. Housing transactions in the first eight months of 2013 rose 23.4 percent year on year.
(Read more: China home prices rise for eighth straight month)
Beneath the surface of this supply-and-demand picture are the vagaries of government policy. "The government wants to control housing prices, but the property market is the biggest bright spot of the Chinese economy. It worries about taking actions that slow real estate investment, and it's very difficult to strike a balance," said Yin Zhongli, a researcher with the Chinese Academy of Social Sciences.
The Chinese government's stimulus spending during the global financial crisis stoked a huge jump in housing prices and since 2010 it has waged a continuous battle to rein them in. It has raised mandatory mortgage down payments, blocked banks from lending to developers, restricted the number of homes people can buy and increased the tax on housing sales.
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But on taking office in March, the country's new leaders – Xi Jinping and Li Keqiang – inherited a slowing economy and opted not to enact any new property tightening policies on top of measures already in place. Analysts believe this has given developers and home buyers the necessary confidence to flood back into the property market.
"There has been no emphasis on tightening and credit has been quite loose," said Liu Yuan, head of research at Centaline China, a real estate brokerage.
The frothy property market has boosted the broader economy. Just a few months ago investors and analysts were worried about China's slowdown, but a strong run of investment and production data has sent them scurrying to upgrade their forecasts. The housing strength has also spilled over to land sales, with records set at land auctions in recent weeks as developers compete for the best plots in the biggest cities.
Attention is beginning to shift to when Messrs Xi and Li might decide enough is enough, and move to cool the property market. Many are betting they will hold fire until a big Communist party meeting in November, wary of doing anything that might throw the growth rebound off course.
As if to make that point, the national statistics bureau published a statement accompanying the property data on Wednesday that propagated a dovish line. "Although housing prices have continued to increase, the size of the increase has narrowed in month-on-month terms," said Liu Jianwei, an analyst with the bureau. Prices were up 0.8 percent month on month in August, down from a 1.7 percent increase in March.
Back in Shanghai's Majestic City, one of the residents, Wang Bing, had a different interpretation. Pushing his nephew in a stroller, he pointed to empty shop fronts at its base – evidence, he said, that many of the homes had been sold to speculators and people had not moved in. "Rising property prices are good for the economy but are hurting ordinary people. It's like the government has eaten a piece of fatty meat and doesn't want to spit it out," he said.