New home sales fell in July for the second month in Shanghai as weak sentiment continued to prevail while the average price gained slightly, boosted by more sales of luxury properties.

Sales of new homes, excluding affordable housing, fell 2.5 percent to 770,000 square meters last month, below the 800,000-square-meter level for two straight months, Shanghai Deovolente Realty Co said in a report released yesterday.

But the average price gained 2.6 percent from June to 22,051 yuan (US$3,418) per square meter in July. Increased sales of luxury homes boosted the monthly rise in the average price. A total of 40,000 square meters of new homes costing above 50,000 yuan per square meter were sold in the city last month, up 23 percent from June, according to Deovolente data.

But the supply of new homes last month dropped 14 percent from June to 860,000 square meters.

"While the latest restrictive measures introduced by the central government have left an impact on transaction volumes over the past six months, housing prices managed to hold on," said Lu Qilin, a researcher with Deovolente. "The average price seemed stable even half a year after the implementation of several tightening policies while many developments across the city posted a rise in prices."

Deovolente has uncovered a price rise at more than two thirds of the 60 developments tracked which sold over 10 units each in January and July. They added prices rose over 10 percent at some of the projects in the two months.

"In general, the overall slack momentum among both real estate developers and home buyers will probably continue in August," Song Huiyong, research director at Shanghai Centaline Property Consultants Ltd, said. "Hopefully, developers might offer larger discounts if transaction volume remains low."

New homes in outlying areas contributed to the bulk of sales last month, with 54 percent of those sold sited beyond the city's Outer Ring Road, said Century 21 China Real Estate.