SALES of new residential properties rose by more than one-third in Shanghai in the first half of this year, data released by the Shanghai Statistics Bureau showed yesterday.

The sales growth is evidence that buying sentiment has been recovering steadily amid solid demand despite measures to rein in housing speculation remaining in place.

The city, meanwhile, saw declines in both homebuilding and completion, posing a risk of inadequate supply and further rise in prices.

Between January and June, the purchases of new residential properties totaled 9.53 million square meters across the city, a year-on-year increase of 35.5 percent. For properties of all types, sales surged 39.5 percent annually to 11.07 million square meters during the period, the bureau said.

On the supply side, groundbreaking for new homes fell 13.2 percent year on year to 7.86 million square meters while construction was completed for 6.68 million square meters of new houses, an annual retreat of 5.8 percent.

Investment in real estate development covering all types of properties, meanwhile, rose 21.7 percent to 126.8 billion yuan (US$20.5 billion) in the first six months, a rise of 9 percentage points from the same period a year ago. Of this, investment in residential properties jumped 9.5 percent to 72.56 billion yuan from the same period last year, according to the bureau.

"In the medium-term, new home supply in Shanghai will see a decline as a result of a decrease in groundbreaking activities while the overall transaction volume of new homes is expected to remain stable," Colliers International said in its latest report.