New home prices dropped in Shanghai last week, failing to extend their rally since late July due to robust sales of mid to low-end houses.

The average price of new homes, excluding those designated for relocated residents under urban redevelopment plans, fell 6 percent to 18,740 yuan (US$2,744) per square meter between August 17 and 23, the first drop in four weeks. The transaction volume dipped 3 percent to 379,700 square meters, according to research released yesterday by the Shanghai Uwin Real Estate Information Services Co.

"With more mid to low-end houses coming into the market, we expect the city's home prices to return to normal levels soon," said Shanghai Uwin researcher Lu Qilin. "The current price, though notably lower than a week earlier, still remained very high."

New home prices soared to 19,991 yuan per square meter between August 10 and 16, the highest in Shanghai's history, amid buyers' insatiable appetite for property investment particularly in the high-end market.

"Among the 10 best-selling residential developments in terms of transaction space, three were sold at more than 50,000 yuan per square meter, about half were sold below 12,000 yuan per square meter on average, which attributed to the weekly price decrease," explained Xue Jianxiong, an analyst with E-House (China) Holdings Ltd.

Analysts expect new home prices to ease in September when 1.5 million square meters of new houses are expected to come into the local market.

(Shanghai Daily August 25, 2009)