SHANGHAI -- Continued policy tightening, sagging sales and a looming cash flow crisis are likely to push Chinese property developers to slash their prices further.

Earlier this month, Poly Real Estate, the country's second-largest developer by market value, lowered prices for one of its projects in Shanghai by 2,000 yuan ($317.56) per square meter.

The move was immediately joined by many other big developers, including China Merchants, Vanke, China Resources and Greenland.

With the government repeatedly making clear its tightening stance, analysts expected the move to lead to another wave of price cuts nationwide.

The municipal government of Shanghai on Feb 28 issued a notice to reiterate its stance on property price control, dousing previous market expectations of policy softening.

The notice, which further specified the city's home-purchase limit policies, overruled a statement made by its housing authorities a week ago that a non-Shanghai registered family can buy a second home if it had obtained residence permits for no less than three years.

The act, together with recent two call-offs on a bailout plan in eastern city of Wuhu and a similar policy in southern city of Foshan, showed the government's determination in steering the market to back to normalcy.

"The move will further suppress sales, promoting developers and used-home sellers to make deeper price cuts," said Shi Hongrui, managing director with Shanghai Hanyu Property.

In January, home prices in the 70 major Chinese cities monitored by the National Bureau of Statistics all ceased rising as a result of the government's persistent cooling measures.

The nation started adopting measures to rein in the runaway market in 2010. These measures included tight credits, a third-home purchase ban, higher downpayments and property tax trials.

Market insiders forecast up-to-20-percent drops in home prices across first-tier cities such as Beijing and Shanghai over next six to 12 months.

"Policy fine-tuning may come after the sector's key indices (such as prices, investments) drop further," said Su Xuejing, an analyst with the Changjiang Securities.

Data with the Centaline Group, the country's leading property agency, showed that sales of 16 leading developers dropped to 30 billion yuan in January, down from 66.36 billion yuan of the same period last year.

Consumers felt less incentive to make purchases because home prices remained higher than most could afford. Xue Jianxiong, an analyst with China Real Estate Information Corp., said Chinese wage-earners face huge pressure from buying a home.

"It will take a typical family of three in Shanghai, who together earn an annual income of 108,700 yuan, to work for 23 years plus 8 months and save all that money to afford a 2.58-million-yuan home, which was the average price for the city's commercial homes," Xue said.

According to a survey released by Credit Suisse Research Institute, its index reflecting respondents' willingness to purchase property over next two years dropped to 16 percent in 2011 from 22 percent in 2010.

Shrinking sales have also worsened the cash flow for capital-thirsty property developers, as the country tightened money supply to mop up liquidity.

China's central bank hiked the benchmark interest rates three times and banks' reserve requirement ratio six times last year.

Data from Guotai Junan Securities showed 175.8 billion yuan of real estate trust in total will mature this year, with 50.4 billion yuan due in July, the peak amount of the year.

Under the repayment pressure, the debt-laden property developer Greentown China Holdings Ltd. sold stakes in five projects for 1.34 billion yuan over past two months, while planning to sell four more.

"The biggest crisis for real estate developers will be about their debts this year," said Chen Jinsong, chairman with Shenzhen World Union Properties Consultancy, noting that developers may face profit-losing and even bankruptcy risks if home prices fall over 20 percent.

Property shares closed lower on Feb 29 following Shanghai's statement, with Poly Real Estate down 3.31 percent to 11.1 yuan per share, and Greentown China down 2.16 percent to 5.9 yuan.