(Yicai Global) Sept. 15 -- Guangzhou, a first-tier city in southern China, is planning to allow property developers to slash new home prices by as much as 20 percent to spur more sales, according to an insider.

The capital city of Guangdong province will adjust its policy so that developers will be allowed to raise their prices a maximum of 10 percent or cut them by a fifth from the prices reported to the government instead of the earlier 6 percent maximum hike or decrease, Yicai Global learned from a person working for a property developer. The exact area of implementation is not determined yet, the source added.

A realtor confirmed the intended policy shift that should cover the whole city of Guangzhou to Yicai Global. The policy should provide developers with more room to adjust their prices but not all property prices will fall by 20 percent, he said.

Developers still need to make a profit after cutting their prices, as the cost of land is not cheap, another realtor said.

The original 6-percent limit was set to guide market expectations and prices during a property boom, but the market has changed so it is necessary to give developers greater pricing autonomy to promote sales of some projects with poor demand, said Li Yujia, chief researcher at a residential policy center of the Guangdong Urban & Rural Planning and Design Institute.

Guangzhou’s property market entered a downward cycle after April 2021. In the first half of this year, new home transactions declined by 35 percent from a year ago, according to data from Centaline Property. Meanwhile, second-hand home sales dropped by 44 percent year-over-year.

During the Mid-Autumn Festival holiday, the sold area of new homes dropped by 56 percent to 40,000 square meters in Guangzhou YoY, according to data from the China Index Academy. The three-day holiday ended Sept. 12.

Editors: Tang Shihua, Emmi Laine, Xiao Yi