Housing was doled out by the state when Communist-style collectivism dominated economic management. But in the past two decades that has given way to market-oriented principles as China's economy has opened.
New home prices have soared, more than quadrupling in Beijing and Shanghai since 2003, and more than doubling in the country as a whole, according to a report by Jeremy Stevens, Beijing-based Asia economist at South Africa's Standard Bank.
The increases have been a key source of wealth for China's rising middle classes, and a major driver of the economy.
Now some -- including individuals who have made fortunes -- foresee imminent disaster.
"I think Chinese property is the Titanic about to crash into the iceberg right in front of it," Pan Shiyi, billionaire chairman of commercial developer SOHO China, said at a forum, China Business News reported last week.
At the same time, surging prices have driven homes beyond the reach of many ordinary Chinese, stoking resentment and inequality.
The People's Bank of China, the central bank, last month asked domestic lenders to give first-time home buyers priority in mortgage lending, which analysts saw as aimed at boosting home purchases amid oversupply.
Observers and analysts concur that problems are rife and cannot be ignored by authorities, lest economic growth take a hit.
"Real estate is nearly 20 percent of GDP (gross domestic product) in China so if that sector has a problem you definitely have a problem," Joerg Wuttke, president of the European Union Chamber of Commerce in China, told AFP.
"Definitely a real estate bubble bursting is bad news."
- Negative outlook -
Home prices in major Chinese cities posted their first monthly decline in nearly two years in May, an independent survey showed Saturday, providing new evidence the once red-hot market is losing steam.
The average price of a new home in 100 major cities declined by 0.32 percent from April to 10,978 yuan ($1,758) per square metre ($164 per square foot), according to the China Index Academy (CIA), the first fall since June 2012.
Year on year, new home cost growth slowed for a fifth straight month, rising 7.84 percent, though prices fell in 31 of the 100 cities.
The results mask huge variety, however, as some of the country's largest cities are still maintaining double-digit gains. Beijing prices rose 22.39 percent year-on-year in May.
Barclays economist Chang Jian said in a report that "the risks of a disorderly adjustment are real and rising", given factors including expectations of falling prices, financial trouble among developers, heavily-indebted local governments and a weak financial system.
Moody's Investors Service downgraded its outlook for Chinese property to "negative" from "stable", citing an expected "significant slowdown" in residential property sales growth, high inventories and weaker liquidity over the next year, along with lower expectations for the economy.
- Ghost cities -
There is so far little concern a domestic real-estate meltdown could trigger panic in the broader global economy and banking system such as during the sub-prime crisis in the United States, as China's heavily regulated financial system and property market remain relatively isolated.
The housing trouble, however, comes at a sensitive time as China's leaders want to shift the country's growth model to one where private spending, rather than public-sponsored investment, drives expansion.
Wang Tao, a Hong Kong-based economist at UBS, said the government "still has many levers to pull to stabilise construction and support economic growth".
"We do not expect a sudden collapse of property prices or a financial or balance-of-payment crisis, as seen often in emerging economies," she wrote in a report.
But the consequences of a property bust could still be painful.
Standard Bank's Stevens said that over the last three years the vast majority of China's middle class wealth increase has come from their home values, meaning they are now "more vulnerable to a price correction".
China's government has been trying to contain property values through measures such as restrictions on purchases of second and third homes, higher minimum down-payments and taxes in some cities on multiple and non-locally owned homes.
But it is a fine line to tread, as local authorities make much of their income from land sales to developers, so curbing property development can slow economic growth in China's regions.
The downside to unhindered development can be seen in China's so-called ghost cities, urban areas scattered throughout the country and characterised by new and largely empty apartment blocks.
"Unfortunately, housing is one of the few sectors that the Chinese government has not mastered its control over," Societe Generale economist Yao Wei said in a report.
"Adding everything together, the aggregate exposure of China's financial system to the property market is likely to be as much as 80 percent of GDP," she added.
"This is not a sector that can go terribly wrong if China wants to avoid a hard landing."