SALES of pre-owned homes in Shanghai rose in May as buying sentiment recovered, but the growth may be sustained due to an inadequate supply and the approach of the slack season for property sales.

The sales of such homes rose 3.7 percent last month to 20,758 units across the city, Shanghai Deovolente Realty Co said in a latest report. It added the average cost for a resale home rose 4.7 percent from April to 18,009 yuan (US$2,904) per square meter - a record in the city.

"Months after the central government announcement of a 20-percent capital gains tax on property sales, the local authority hasn't really implemented the policy and many home-seekers just decided to proceed with their home purchases instead of waiting further," said Lu Qilin, a director at Deovolente.

But he expects "more buyers to sit on the sidelines as supply remains inadequate" while the approaching summer is a time for slack sales.

Separately Century 21 China Real Estate, one of the city's biggest realtors, said that prices of large homes grew more than those for medium or small-sized properties while high-end homes also recorded a faster price increase.

Of the city's top 10 residential projects which saw the biggest monthly price rise in May, eight were priced at above 40,000 yuan a square meter, according to Century 21.