Some 6 million square metres of residential property were sold in the first four months of the year, said Zhang Hongming, director of the city's Urban Development Centre.

With more than $3,000 gross domestic product (GDP) per capita, average families favour mainly middle- and lower-grade residences. Sales of upmarket properties rose by 8-9 per cent, he said.

The foreign sales sector improved and the rental and occupancy rate of office buildings also gained, indicating the market is approaching maturity.

The improving global economy with China's pending entry to the World Trade Organization make for favourbale conditions for development of the property industry.

Zhang said the cancellation of tolls for crossing the Huangpu River and the operation of the subway lines are pushing forward sales in areas such as Pudong and Minhang.

Zhang said developments in the local property market do not constitute a "recovery."

He said sales have always been rising, though the rate of increase has differed in different years.

From 1992 to 1995, sales soared luring swarms of developers, domestic and foreign, into the industry.

But the frantic market of the early 1990s resulted in tremendous oversupply of housing by 1996, despite which sales still rose by 2 per cent that year.

In 1997, sales gained 20 per cent and last year sales recorded a similar rise.

But oversupply has driven the whole market to lower prices by 30 per cent. Prices of office space were slashed by 50 to 60 per cent.

"Prices are now stable though there have been some rises," Zhang said.

The local property market leads the nation and has developed into a mature one, according to Yin Kunhua, director of the Property Research Centre with Shanghai University of Finance and Economics.

Yin shares Zhang's optimism that the market for new buildings will reach its zenith, which will last for several years, in two or three years.

Yin said with effective government support and laws, and care on the part of estate agencies and developers, supply and demand are not likely to deviate much from each other again.

But both Zhang and Yin do not deny there are still some urgent problems which require tackling if a sound property market is to be achieved.

The major one is that 300 incomplete or sub-standard buildings remain in stock.

Yin said the glut was due to excessive construction under the direction of government some years ago.

A public company staffed with expert personnel skilled in evaluation, design and management must be set up to dispose of the overstock while minimizing losses of national capital, Yin stressed.

He pointed out other problems were: The banking system is rather conservative, the availability of some buildings is not guaranteed, buyers are overcharged and some developers sell the same properties to different buyers.