“Transaction volumes have been picking up, that's primarily from first-time home buyers,” said Michael Klibaner, Shanghai-based head of China research at broker Jones Lang LaSalle Inc. “Now, with the two interest rate cuts in the last month, the pricing of mortgages has come down too.”

Gao Yang, a 32-year-old employee at a company that makes bathroom fixtures, is among buyers leading the turnaround. In May, he spent 1.2 million yuan on a 52-square-meter (560-square- foot) apartment outside Beijing's fourth ring road, one of the capital's six highway loops.

“Home prices in big cities such as Beijing and Shanghai, will never go down,” Gao said. “I had already missed some good deals, and I was afraid home prices would rise again.”

Even before the central bank cut interest rates, lenders had lowered mortgage rates for first-home buyers, with some banks in Beijing offering a 15 percent discount to the central bank's benchmark as compared with premiums of as much as 10 percent last year, according to Bacic & 5i5j Group, the capital's second-biggest real estate broker.

Eoin Treacy's view The majority of pundits have been predicting the demise of the Chinese property market for a number of years and there is no denying that prices had hit unacceptably high levels before the government began to tighten monetary policy and property market regulation. However there is an additional aspect to the market that does not attract a great deal of attention.

Chinese property prices are expensive on a normal price to income ratio. However China does not yet have a mature corporate bond market and the number of ways in which an investor can express a view via the capital markets is still quite constricted. In addition to a cultural affinity for hard assets such as property and gold, the absence of deep capital markets fosters interest in these assets.

A return of speculative interest in the property market will not be welcomed by Beijing since one of its main policy objectives has been to increase affordability. The Shanghai Property Index has been trending higher since January and broke the six-month progression of lower rally highs in the process. It pulled back sharply yesterday and will need to hold in the current region if medium-term recovery potential is to be given the benefit of the doubt.