Taxi driver Chen Hui gazes up at the multi-coloured Phoenix apartments towering over a bustling Beijing highway.
"Nice homes, but too expensive. Probably some people are `stir-frying.' The prices shouldn't be so high," Chen grumbled, using a popular term for speculative investing.
The upper-end Phoenix apartments are priced at about 10,000 yuan (US$1,200) per square meter, meaning a typical three-bedroom flat sells for about 1.2 million yuan.
No wonder people such as Chen, who earns about 2,500 yuan a month, are complaining.
The thirst for low-cost housing by millions of families like Chen's has been ignored as developers have set eyes on more expensive homes in pursuit of higher returns, analysts said.
The focus on high-end homes has raised fears of a property bubble like one that emerged, and burst, in the 1990s, they said.
"Developers are still feverish about high-end property because of higher profit margins," said Bao Zongsheng, a researcher at the Ministry of Construction. "Low-cost housing can hardly arouse their interest."
While the Phoenix flats have been snapped up by eager middle-class families, prospects for new projects could be tough. New tower blocks and luxury villas are sprouting just as demand for them has started easing, analysts said.
Investment in property development is growing at nearly four times the pace of China's overall economy, sparked by reforms in 1998 to scrap the welfare system, in which state agencies and firms doled out free homes.
Easy mortgages, rising incomes and a robust economy have fuelled growth. China's WTO entry and the awarding of the 2008 Summer Olympics to Beijing have caused many developers to pile into the city's property market.
The home-buying frenzy has also spread from big cities in the east such as Beijing and Shanghai to inland cities such as Xi'an.
Developers are reaping a windfall. The latest Forbes magazine list of the 100 richest Chinese showed five of the top 10 were real-estate tycoons.
"The property sector still generates big profits," said Wang Chuanglian, an analyst at China Southern Securities.
But Beijing is worried about a bubble.
The amount of property sold in the first nine months of this year was 24 percent higher than a year earlier at 111.3 million square meters. But property that has stayed vacant for more than one year was up 11.5 percent in the first eight months of the year at nearly 44 million square meters, the central bank said.
A collapse of the industry could leave already sickly banks with even more bad loans.
Premier Zhu Rongji recently warned local officials to be wary of a bubble. The central bank, noting that billions of dollars in loans were at stake, recently ordered a tightening of housing credit to "prevent a renewed bubble."
"Housing prices in big cities are rising, vacancies in some areas are growing rapidly and there is an overheating in high-grade offices," the bank said in a notice last month.
So far, banks have opened their vaults for home buyers, with outstanding mortgages hitting 742 billion yuan at the end of September, on top of 497 billion yuan in loans for developers, central bank figures show. Such lending was negligible before 1998.
But for top officials such as Premier Zhu, the bursting of the 1993-1994 speculative bubble is still a fresh memory. They recall how prices crashed and saddled China with bad debt and a property glut that did not ease until the end of the decade.
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