New home sales in Shanghai are set to nearly double in March from a month earlier, extending its rally for a second straight month amid strong demand from mainly relocated residents as well as newly weds.

Around 1.38 million square meters of new homes, excluding those for relocation uses, were sold between March 1 and March 29 against 787,600 square meters in February, Shanghai Uwin Real Estate Information Services Co said Monday.

The last two days of the month would probably help add another 100,000 square meters, the research company estimated.

"The recent surge in sales was mainly due to long pent-up demand being released as well as price cuts by developers,'' Lu Qilin, deputy head of research at Uwin, told Shanghai Daily yesterday. "We've noticed that a significant number of new home buyers are relocated residents and young people between 25 and 35 years old who purchase homes for marriage use.''

The recent sales boom has come with a rise in average transaction prices as two high-end residential projects in Pudong New Area saw much higher sales in the past few weeks. The city's average price for new homes was 13,195 yuan (US$1,931) per square meter as of Sunday, versus 12,141 yuan in February.

For instance, Yanlord Town sold 58 units last week alone, equivalent to the monthly volume during the past few months. Shimao Riviera Garden saw 45 units sold during the same period, after a 25-percent discount was offered by its developer.

But some analysts are cautious whether the boom could last.

"It is still a bit early to anticipate a full recovery of the market momentum as investors have not been involved,'' said Jenny Wu, director for residential, DTZ's East China operations. "Further corrections would probably be seen by the end of this year," Wu said.

Xue Jianxiong, an analyst with E-House (China) Holdings Ltd, said the recent rise in transaction volumes could have negative impact on the local housing market.

"The economic scenario still remains uncertain and people's purchasing power is not likely to increase in the near future,'' said Xue. "It is pretty likely that the market would see sluggish sales again in June, the traditional off season for home sales, if demand from end users dries up too rapidly.''

(Shanghai Daily March 31, 2009)