Chiang pointed out that developers need to submit price lists of their projects to the government for approval before they can release them for sale. But many applications have been on hold because the government has judged the prices submitted by the developers were either too high or too low.

"The government is concerned about the impact on the market if flat prices are high and sales are still good," said Chiang. "On the other hand, it doesn't want to see prices drop by more than 5 per cent - and it is difficult for it to maintain a balance. Developers are all nervous."

In the middle of the year, when market sentiment was poor, developers discounted their prices to woo buyers. The strategy succeeded and they managed to sell more flats - but existing owners staged protests outside developers' offices because the value of their flats had depreciated as a result of the discounts.

With sentiment now turning positive, developers had attempted to mark their prices up, for example from around 20,000 yuan (HK$24,400) to 21,000 yuan per square metre, said Chiang. But their revised applications have not been approved.

Traditionally, the mainland property market becomes active after summer and the phrase "golden September and silver October" is used to describe the active sales period in these two months. However, data compiled by Centaline Property Research Centre shows that 171,415 new flats were sold in 54 mainland cities during the first 23 days of this month, down nearly 12.2 per cent from 195,146 units in the same period for last month.

Anson Qu Anxin, the research centre's senior manager based in Shanghai, said the drop in sales was caused mainly by a shortage of supply of new flats on the market. "Some developers told us they were planning to put more flats up for sale in September, but this didn't happen," Qu said. "Some developers tried to increase their prices by more than 10 per cent, and their price lists have not yet been approved."

Qu said that apart from existing tightening measures and delayed pre-sale approvals, a move by some banks to end their 15 per cent discount schemes on mortgage interest rates for first-time homebuyers since late last month also dampened demand.

Both Chiang and Qu expect the market to improve in October, after more projects obtained pre-sale approval.

"Sentiment is improving slightly as people think the government has launched most measures already. In addition, the third round of quantitative easing by the US will pump money into the market and cause inflation," Chiang said. Sales should climb next month but prices would be flat.

Britney Chen Shaomin, 26, recently bought a new 143 square metre flat in Shui On Land's Foshan Lingnan Tiandi for over 2 million yuan, or 14,053 yuan per square metre. She said her flat was about 1,000 yuan to 2,000 yuan per square metre cheaper than some flats sold in the same project two years ago.

Thanks to the government's cooling measures, she said prices in Foshan remained flat this year so her family could buy a flat. But she believes home prices will continue to rise in the long run.

Ken Cheong Kuok-leong, a manager at Shui On's commercial department in Foshan, said that, because of home-purchase restrictions, buyers were mainly end-users and therefore the home market for September and October would be stable, not rosy.