(Yicai Global) Sept. 13 -- While China’s big cities are stepping up measures to prevent a sharp increase in home prices, at least seven mid-sized cities are trying to limit price cuts by real estate companies, The Paper reported today.

The local governments of Zhuzhou and Yueyang in central China, Jiangyin and Heze in the east, Kunming in the southwest, and Shenyang and Tangshan in the north have met with real estate developers or issued restrictions on lower prices.

Home sales have declined as the public takes a wait-and-see approach to the real estate market, and many developers have cut prices in order to ease their debt pressures.

China sold 115 million square meters of residential property in July, down 9.5 percent from the previous year and 40.6 percent lower than in June, according to the National Bureau of Statistics.

The market is under relatively high pressure in the second half of the year, mainly due to price cutting by developers and a widespread belief among consumers that house prices will not increase amid stricter regulations, Sun Hongbin, chairman of real estate giant Sunac China Holdings, said earlier at a press briefing to release the firm’s semi-annual earnings results. 

Debt pressures are also driving some firms to lower prices. Together, they have CNY1.2 trillion (USD185.9 billion) coming due this year, an average of more than CNY100 billion a month, according to data from Tospur Consulting Research Center. The sector’s average debt ratio was 77.9 percent in the second quarter, down from 79.2 percent in the first quarter.

Local governments do not want to see the cost of homes continuing to fall after real estate firms bid against each other, according to Guo Zhen, a property expert at GF Securities Development Research Center. Maintaining stable prices, without sharp gains or falls, has been the direction of regulation in recent years, he added.

Editor: Peter Thomas