Shanghai's pre-owned residential housing sector is expected to expand in the next few months as more new flats complete construction.

As many large residential projects, especially those in the downtown area, will be finished and delivered to homebuyers in the second half, this in turn will boost the city's second-hand housing supply, according to a report released by Shanghai Existing Property Office.

The report by the market watchdog did not provide the exact area to be delivered to homebuyers. But according to an earlier report by the Shanghai Housing and Land Administrative Bureau, 17 million square meters of new apartments is expected to launch on the market during the second half.

In April the Shanghai government ruled the transfer of uncompleted flats illegal to prevent speculators from re-selling their apartments shortly after they purchased them to take profit.

"Since the government stipulates only completed apartments are allowed to be traded, some investors who planned to reap profit have already been waiting for a long time," said Huang Weiwei, general secretary of the office. "When their apartments are delivered, they are likely to put them on the second-hand market as soon as possible."

Despite the expected supply increase, analysts predicted pre-owned housing prices will keep steady through the end of the year.

"The demand for second-hand housing is still fundamentally strong in the city," said Xue Guangyue, an analyst with Sunco Investment Inc.

"Even if the supply increases to some extent, you cannot expect housing prices to decline in the short term."

The benchmark index tracking the city's second-hand housing prices increased 1.1 percent to 1,382 points last month, the office reported yesterday.

Last month, the growth of pre-owned apartment price near the Daning area, Zhabei District, was the highest in Shanghai, surging 5.4 percent. Housing prices in the area increased 357 yuan (US$43) in only one month to 6,900 yuan per square meter because of the imminent extension of the Rail Transportation Line 1, according to the report.