Guangzhou city has allowed property developers to reduce sale prices of homes by as much as 20 percent compared with 6 percent previously, financial news outlet Yicai reported on Thursday, in what would be the biggest cuts allowed by a top-tier mainland city.

Mainland authorities set floors and caps for sales price changes in the property sector, which accounts for a quarter of the economy, to avoid sharp price fluctuations. Most cities set a floor of around 6 percent for cuts in sale prices.

The world's second-largest economy narrowly avoided contracting in the second quarter as Covid-19 restrictions and the slumping property sector badly damaged consumer and business confidence.

Top policymakers have been calling on local governments to introduce city-specific measures to stabilise the property market. More than 200 Chinese cities, mostly small and mid-sized cities, have taken steps to boost fragile demand this year, including subsidies, smaller down payments, cuts in mortgage interest rates and allowing bigger mortgages.

Shares of Chinese property developers rallied on Thursday on hopes that cities in the mainland will adopt more such measures, with the Hang Seng Mainland Properties Index in Hong Kong jumping more than 5 percent while China's CSI Real Estate Index rose more than 4 percent.

In Guangzhou, the new floor applies to the entire city although not every housing development will need to reduce prices by 20 percent to attract buyers, Yicai quoted a property agent as saying.

In the first half of this year, only 39,618 new homes were sold in Guangzhou, representing a 35 percent slide from the same period a year earlier, Yicai said. (Reuters)