Shanghai home sales dive 34% to 5-year low

NEW home sales in Shanghai dropped 34% in the first half to the lowest level in five years as government measures to cool the property market had their desired effect.

Data from Uwin Real Estate Information Corp showed a total of 3.57 million square metres was sold in Shanghai's primary market, compared with 5.41 million sq m a year earlier, and 47% less than the 6.74 million sq m in the first half of 2008.

Meanwhile, the average price of new flats fell 14.2% year on year last month, back to the level at the end of last year of 19,168 yuan (RM9,058.54) per square metre.

However, as average prices around the country have fallen only about 10%, there is speculation in the mainland media that new cooling measures will be introduced during this quarter.

In Shanghai's secondary market in the first half, just 69,107 flats were sold, half the number a year earlier, data from property agency Sinyi Realty shows.

Shanghai is not the only city to have been affected by the measures. Property consultancy DTZ's figures show new home sales in first-tier cities fell 52% in May from April (73% year on year). In second-tier cities, sales dropped 20% in May. The firm expects sales to have also slowed last month.

The average price of new homes in Beijing fell 20.9% in May amid a sharp reduction in transactions, which were dominated by mass residential units. Developers released occasional "special offers" for limited numbers of units to lure buyers.

Despite the latest data showing the property market had entered a consolidation phase, a number of mainland newspapers speculated yesterday that the government could release new measures in the coming months.

This was prompted by a prediction by Land and Resources Minister Xu Shaoshi that property prices would fall. Xu said at a government meeting in Dalian on Sunday that prices had stayed firm even though sales had dropped sharply in the past few months but that he expected prices to come down as the cooling measures continued.

Sun Hung Kai Financial strategist Castor Pang Wai-sun said it was possible the government would introduce new measures.

"The average property prices on the mainland have dropped only 10% from the peak in the first quarter. They are not back to a reasonable level, which means they have failed to meet the target of the cooling measures released earlier this year," he said.

The government wanted to see prices at the level of early last year, Pang said. — South China Morning Post