Buyers stymied by high property price

Housing sales fell 35 percent in Guangzhou from the last week of August to the first week of September. Along with first-tier cities like Guangzhou, most cities around the country experienced a similar drop in housing sales at the beginning of September, which has typically been the peak season for property in China.

Real estate developers usually expect to see big sales, and earn big profits, during this month, which they call the "golden period." This year, however, the period has lost its luster.

Developers would like to make it seem as if it is always the best time to buy a home. They justify their hard sell by arguing that demand for homes is rigid and never slackens. They say ordinary people are always in need of new homes.

For example, they like to argue that young men need to buy a home before they can find a wife, or that families need to buy bigger homes to improve their standard of living.

This argument, however, is flawed because it disregards the issue of price. Although many ordinary people would like to buy homes, they simply cannot afford them at current prices, particularly in first-tier cities. It turns out that potential home buyers are sensitive to price and won't buy when homes get too expensive.

Consequently, the housing market can still slump even when there is potential demand. If developers want to capitalize on this demand, they will eventually have to lower prices.