Existing home transactions at Shanghai's two leading real estate brokerages declined by double digits this month as a result of soaring prices and a further cutback in supply.

Shanghai Centaline Property Consultants Ltd, the biggest property chain in the city, saw transaction volume fall about 20 percent by last Thursday while a similar picture was also seen at Century 21 Real Estate, the second-largest agency, where deals dropped 15 to 20 percent this month compared with June.

"Existing home prices continued to rise in July by between 5 and 8 percent in different locations and many have already exceeded the record level set in 2007 when the market was overheated," said Lv Shanglun, deputy general manager of Shanghai Centaline. "To make it worse, the monthly supply of used apartments has fallen between 10 and 20 percent on average since April."

In certain areas the drop in transactions was even larger. Centaline research found that existing home deals in Xintiandi in Luwan District and Lujiazui in Pudong New Area fell by a bigger margin of about 40 percent so far this month.

"The local banking regulator's announcement that the 40 percent down payment should be strictly adhered for second homes has affected investor sentiment," said Wang Yihong, an area director at Centaline.

Investors now account for 40 percent of home buyers in some high-end residences in Lujiazui and Xintiandi, the company said.

The Shanghai Bureau of the China Banking Regulatory Commission reiterated recently local banks must strictly comply with the 40 percent condition on second homes, which was announced in 2007 in a bid to curb real estate speculation.

"Home prices increased so rapidly over recent months and many buyers were forced to give up their home purchase plans," said Huang Hetao, a researcher at Century 21.

(Shanghai Daily July 28, 2009)