Earlier this month, in Hangzhou, capital of Zhejiang Province, a housing project announced a cut in its selling prices and set the market jittering.

The project by DoThink Group cut prices from 18,000 yuan (2,863 U.S. dollars) to 15,800 yuan per square meter last week to clear up its unsold units.

Hangzhou is one of the six cities with falling new home prices, down slightly by 0.1 percentage point, analysts claim the case as an isolated anomaly.

A slowing rise and increasing geographic diversification is exactly what analysts have predicted, Lu said.

"Diversification will increase as urbanization and migration create both winners and losers," said Lu.

Zhang Dawei, chief analyst with property agent Centaline, echoed Lu's views. Home prices drop in cities with high stockpiles and those with slower population growth, Zhang said.

First and second tier cities still have strong housing demand and prices may continue to rise, while third and fourth tier cities have excess supply and stockpiles, Zhang said.

March data will be crucial, as pent up demand from the first two months is usually released and policy will be set at the annual legislative sessions.

In 2014, Lu expects price increases to slow to low single digits year on year on tapering demands and higher supply.

Chinese property shares tumbled 3.74 percent on Monday.

China Vanke, the country's largest property developer by market value, dived 6.56 percent, while Poly Real Estate plummeted 8.51 percent.