Housing prices in China accelerated in December, climbing 7.8 per cent from the same month a year earlier and prompting a flurry of new government measures as Beijing attempts to slow soaring prices without derailing the economic recovery.

Average prices in 70 large and medium-sized cities across the country rose 1.5 per cent in just one month to the end of December, the National Development and Reform Commission said yesterday.

The increase was the fastest in 18 months and a strong acceleration from November, when average prices rose 5.7 per cent year-on-year and 1.2 per cent from October.

Most analysts and a growing chorus of developers say a bubble has already formed in China's property market, driven mostly by the huge surge of easy credit pumped into the economy by state-owned banks over the past year.

New loans extended in 2009 more than doubled from 2008 to about Rmb10,000bn ($1,467bn, €1,012bn, £909bn) as the government ordered the banks to support flagging growth in the face of the financial crisis.

In response to a question from the Financial Times, Qi Ji, China's vice-minister of housing and urban-rural development, refused to say whether he thought a bubble had formed in the property market. But he did say that house prices, particularly in large coastal cities, had reached levels that are “obviously too high”.

Beijing is responding by enforcing policies to limit speculative investments and ordering local governments to increase the supply of affordable housing, he said. His comments echo a statement at the start of the week by the State Council, China's cabinet, which reiterated a minimum down-payment ratio of 40 per cent for everyone except first-time home-buyers, and ordered banks to rein in credit to property developers.

But some analysts say the policies have come too late to head off a property bubble.

“The government's regulatory skill is not so good and they have missed the best opportunity to cool down the market,” said Fang Yan, an analyst with Guosen Securities. “If they had begun to intervene last July they wouldn't be facing this situation now.”

The scale of the bubble is still being debated, but some analysts and officials have started to warn about serious repercussions for the financial system when prices begin to fall.

About 20 per cent of all loans extended by Chinese banks now go to the property sector, including individual mortgages and loans to developers, according to Wang Zhaoxing, vice-chairman of the China Banking Regulatory Commission.

Banks made Rmb952bn worth of individual mortgage loans in the first three quarters of last year, nearly four times the amount issued in the same period in 2008, according to central bank data.