BEIJING, May 30 -- Preowned residential units are expected to dominate housing transactions in Shanghai in the following years following the massive construction of new apartments.

    Major real estate agencies in Shanghai last month reported strong growth in the transactions of second-hand houses, a sector which analysts said is set to become the main part of the city's home sales in the future.

    The city's benchmark index for second-hand homes rose for the first time last month to 1,621 points since last June when the government took measures to curb speculation in the market.

    Preowned property transactions rose 33 percent to 1.24 million square meters in April from March, according to Shanghai Hanyu Property Agency Limited, one of the city's largest second hand property agencies with more than 50 outlets across the city.

    Among the 52 areas citywide tracked by Hanyu, nearly 40 areas reported prices rebounded by an average of 0.35 percent from a month ago. Luwan and Changning districts as well as Pudong New Area registered the biggest rises of 1.4 percent, 0.53 percent and 0.51 percent respectively. The transactions recorded by the agency's outlets in Pudong New Area, Minghang and Putuo districts even surpassed the level before last June's government measures, the company said.

    Analysts attributed the rebound to pent-up demand from relocated residents, newly wed couples and policy incentives.

    "Residents are sufficiently compensated for relocations for subway construction or mega projects, which make it possible for them to afford a second hand apartment and not to move far away from where they used to live in the inner city," said Chen Yujue, deputy general manager of Centaline.

    Xue Dingbiao, a 65-year old retired worker bought a 450,000 yuan apartment on Dong'an Road in Xuhui District, just 20 minutes walk from Nanjing Road where he used to live.

    Xue funded the purchase wholly with the compensation he got for relocating from his former residence, a place that will be rebuilt as part of new construction for the 2010 World Expo.

    By June, more than 13,000 families and 1,000 companies will have been relocated to make way for new metro stations as part of plans to triple the length of the current system for the expo. Another 18,000 families will be relocated to make way for construction of World Expo sites.

    Strong demand from newly-wed couples is another major factor that drove up second hand sales as a lot of couples are choosing residences near where their parents live.

    "There are few new developments around my parent's house and so we have to search for suitable apartments among second hand homes," said Zhang Wei, a 29-year-old white-collar worker who now lives with his parents in Jing'an District.

    Shanghai Wedding Trade Association estimates that there will be 150,000 couples tying the knot this year, against 100,000 last year that was superstitiously known as a "widow year" and viewed a bad time to get hitched.

    In March, Shanghai increased the maximum limit for second-hand home buyers seeking mortgage loans from the city's public housing fund, a move designed to help boost the stagnant housing market.

    Buyers of second-hand residences completed after 2001 are now able to apply for mortgage loans from the fund that would cover up to 80 percent of the property's price, against 70 percent previously.

    Zheng Xiuli, a sales person with the Xingzhuang outlet of Centaline China, an estate agency, said she has received increasing number of requests from couples to look for suitable apartments since March.

    "All of them are looking for houses for self use, compared to the same period of last year when more than 60 percent were speculators," she said.

    Shanghai has opened few plots of land for residential use since the second half of 2004 and has not launched any to date this year.

    Due to the lack of land supply, the market will see fewer new developments in the next two to three years, an expert said.

    "The new home sales will significantly drop to about 20 million square meters in the next two to three years and pre-owned housing will play the key role in sales," said Stanley K.K. Chan, managing director of Stanley & Partners Investment Management Co Ltd.

    Last year, Shanghai's new home sales hit 28.46 million square meters, a 12 percent drop from a year ago, said Shanghai Statistics Bureau.

    (Source: Shanghai Daily)