Chart of the Day: The real deal on why developers still refuse to cut home prices

Land acquisition costs are elevated.

Despite several rounds of cooling measures, residential property costs have still not dropped significantly because developers remain extremely reluctant to cut prices.

This reluctance stems from the fact that land acquisition costs were elevated in recent years, as illustrated by this chart from BNP Paribas.

Most land acquisitions were made at costs of $400 to $800 psf, which means that developers need to stick to keep prices elevated in order to make profit.

"We attribute the slower pace of home price declines partly to developers’ holding power on the back of stronger balance sheet, and their reluctance to cut prices, having bought the land at high costs," BNP Paribas said.