Developers in Guangzhou must submit proposed home prices to the government for approval from today, after prices in the city gained the most on the mainland year on year last month.
To try to contain the fast growth in home prices, Guangzhou's Municipal Land Resources and Housing Administrative Bureau ordered developers and property agents to submit pricing for all new projects for scrutiny.
Ellis Wong, general manager at property agency Centaline China's Guangzhou branch, said: "The move sent a signal to developers not to sell their new projects at prices that are too high."
He said the local government rolled out earlier national measures indicating that price rises should not exceed the growth rate of disposal income per capita, for which market forecasts are about 8 per cent this year.
Market watchers believe developers may face difficulty in securing consent for presales if they fail to follow the government's guidance on pricing.
Guangzhou is the second mainland city, after Beijing, to restrict prices for new homes after the State Council announced fresh property curbs last month to try to cool the market.
New home prices in Guangzhou jumped almost 35 per cent year on year to an average cost per square metre of 16,817 yuan (HK$20,915) last month, while the number of transactions surged 50 per cent to 7,131.
Wong attributed the big jump in prices to panic buying before the April 1 deadline for the strict enforcement of a 20 per cent capital gains tax on property.
"Home seekers did not mind paying higher prices, as they wanted to buy before the deadline," he said.
Wong said developers would become cautious when launching their new projects, for fear of tougher rules to be introduced to contain price growth.
"We will have a clearer picture of developers' pricing strategies next month, as many projects will come on the market in the coming 'golden week' Labour Day holidays," he said.
Alan Chiang Sheung-lai, the head of mainland residential property at the consultancy DTZ, said home prices in Guangzhou still lagged behind those in Shenzhen, where they had reached 40,000 to 50,000 yuan per square metre.
"It is too early to make a forecast for home prices, as we need to observe how the new rule affects the market outlook," he said.
Shares of mainland developers fell across the board in Hong Kong yesterday. Guangzhou R&F Properties dropped 3.46 per cent to HK$13.90; Country Garden fell 2.55 per cent to HK$4.19; Agile Properties fell 0.99 per cent to HK$10, and China Overseas Land & Investment was down 2.55 per cent to HK$22.90. The Hang Seng Index fell 1.08 per cent to 21,806.61 points.