(Yicai Global) May 8 -- The recent cooldown in China's real estate market is in line with expectations, and it will remain stable afterward, as it is unlikely to usher in a new round of housing price declines, industry insiders said after a local regulator punished real estate developers for having greatly cut the prices of two projects in their new residential projects.

On May 5, the Suzhou Kunshan Housing and Urban-Rural Development Bureau punished two local real estate projects that considerably cut prices without permission, disrupting the local market and causing social instability. It suspended sales contracts for the projects and said to allow the resumption only after rectifications.

China Vanke is the developer of one of the two projects the Kunshan regulator halted. Before the intervention, the real estate giant offered around 20 percent discount, equal to CNY300,000 (USD43,410), Yicai Global learned. Afterward, the price cut was rectified to only between CNY30,000 and CNY50,000 (USD4,340 and USD7,230).

As a leading property developer with strong bargaining power, Vanke's actions aroused concerns that others will also start a new round of discounts like it happened last year.

However, a number of industry insiders believe that Vanke's price reduction of the above real estate property in Suzhou is an individual case and has little reference value.

The general situation of the property market is stable and improved compared with last year, the insider noted. Real estate developers in Suzhou are cutting discounts and asking for higher requirements on payment methods, they added.

Housing prices in Suzhou have recently risen from CNY26,000 per square meter to CNY28,000 per sqm or even to between CNY40,000 and CNY50,000 in some districts, a local real estate insider said.

An insider from an eastern China-based developer mentioned that housing policies would be relaxed to stimulate the market if there are any signs of decline.

Over 50 cities in China issued 68 real estate-related policies last month, mainly focusing on reducing the down payment ratio and mortgage rates, raising the loan limit of provident funds, and granting housing subsidies. China's port city of Ningbo announced on May 4 that it would relax the age limits on home mortgages to stimulate demand among the elderly.

If the local officials allow developers to offer big discounts, more firms may follow up, triggering a price war and disrupting home buyers' mentality and confidence, further affecting their purchasing behavior, said Lu Wenxi, an analyst at Zhongyuan Real Estate in Shanghai, Caijing reported yesterday.

In order to stabilize housing prices and market expectations, many local governments set a daily discount limit for the real estate market of 10 percent or 15 percent to avoid too significant price cuts and started punishing many developers for excessive price reductions.

Editors: Zhang Yushuo, Futura Costaglione