With property sales seeing a significant decline in many Chinese cities since the start of the year, the red-hot real estate market is catching a chill. Property developers are beginning to cut prices in order to insure cash flow. However, several municipal governments have announced a limit on how much discount developers can offer.
Hangzhoumunicipal government has issued a regulation that warns that if a residential property is sold at 15 percent under the asking price, then the online registration system will automatically deny issuance of registration number needed to complete the property transfer.
According to a Shenzhen official, Shenzhen is the first city to implement these regulations to monitor the changes in property prices.
In Eastern China city of Dongguan, there have been cases of property buyers unable to register online because developer gave them more than 15 percent discount.
"Market confidence is low right now, so it is very hard to sell properties without discount. If the local government keeps a lid on how much discount we can give, we face a hard time," a sales manager complained.
Many property developers acknowledge that limiting discount is an effort to stabilize the property market, and to prevent radical price fluctuation. However, for some cash-strapped real estate companies the move only adds to their problems.