An inadequate supply as well as rising prices may trim new home sales by about 10 percent in Shanghai this month, ending a five-month rally since February.

Sales of new homes were estimated to reach 2.02 million square meters, against 2.19 million square meters last month, E-House (China) Holdings Ltd said yesterday. The firm made the estimation based on statistics gathered in the first 29 days of this month.

Meanwhile, the average price of new homes, excluding those designated for relocated residents under urban redevelopment plans, was forecast to jump 20 percent from a month earlier to 15,675 yuan (US$2,295) per square meter, the highest in a year.

"The local housing market has strengthened since February amid a continued rising momentum among home buyers," said Xue Jianxiong, an analyst with E-House. "However, the supply failed to catch up with demand particularly during the first half of this month as an aftermath of the deadly building collapse in Minhang District last month."

The supply of new homes in the first two weeks of this month was affected after the city government required safety checks on buildings under construction across the city after the June 27 collapse, analysts said.

Statistics showed that only 420,000 square meters of new homes were launched for sale in the first half of this month, and the total area could reach 860,000 square meters in the second half of the month.

Between January and July, about 6.73 million square meters of new homes were introduced in the city, compared with 7.49 million square meters a year earlier. However, sales could reach about 11 million square meters during the seven-month period, almost doubling the 5.74 million square meters done a year earlier.

E-House research also found that about 330 units of new homes costing more than 40,000 yuan per square meter changed hands this month, against 306 units last month.

For next month, analysts predicted that new home supply may surpass this month's as at least 45 batches of new projects are set to come into the market while transaction volume would likely remain at about 2 million square meters.

(Shanghai Daily July 31, 2009)