China developers resist pressure to cut prices, leading to market standoff

On booming Jinshazhou island between Guangzhou and Foshan, developers touting new projects face sluggish sales due to their unwillingness to slash prices, boding ill for the mainland economy that has showed fresh signs of slowdown.

Even after smaller discounts are applied, a 93 square metre, three-bedroom flat in the Starry Sands project, developed by Guangzhou-based Yuexiu Property, costs 1.7 million yuan (HK$2.14 million), or about 18,000 yuan per square metre. The South China Morning Post was the only visitor in more than an hour last Thursday afternoon.

About half an hour's walk from the project - taxis are hard to come by here - Poly Real Estate, another state-owned developer, is trying to offload the remaining 300 units in The West Coast. It is asking 1.45 million yuan for a 79 square metre two-bedroom flat, the lowest price it is willing to offer.

Both prices are little changed from a few months ago, in sharp contrast to expectations that developers would offer big discounts to speed up sales during the so-called Golden September and Silver October period, this year's last chance to hit full-year sales targets to protect their credit ratings and share prices. "I will continue to wait and see," said a man in his 40s who only gave his surname as Xu. He was interested in a two-bedroom flat at the Poly project because of its proximity to good schools.

Despite the cool reception from potential buyers, Yuexiu salesman Ken Hu is not worried. "A lot of clients want to buy but are restricted by purchase curbs," he said. "There is almost no supply of land in the future."

Hu speaks for many developers who want to maximise profits despite a cooling market, betting that the central government will eventually come to the rescue with looser monetary policy because Beijing needs a strong property sector to boost economic growth.