NEW home sales in Shanghai during the week-long Spring Festival holiday fell to the lowest in seven years. Only 1,700 square meters of new homes, excluding government-funded affordable housing, were sold across the city, a report said today.

"The Spring Festival, traditionally a slack period for home sale, coupled with homebuyers' expectation for further price cuts and the government's unwavering rein-in policy, jointly contributed to a record low volume of transactions," said Lu Qilin, a researcher at Shanghai Deovolente Realty Co.

Average home price, meanwhile, dropped 41 percent week-on-week to 16,144 yuan (US$2,563) per square meter, as only one unit managed to fetch a high price between 30,000 yuan and 50,000 yuan per square meter.

On the supply side, only one developer released 7,200 square meters of new homes to the market last week, a drop of 95 percent from the previous seven-day period.

"The local government will soon raise the income threshold for budget home applications. That is bound to dampen the market demand further," said Huang Zhijian, chief analyst with Shanghai Uwin Real Estate Information Services Co.

"Real estate developers will have to offer substantial discounts in the next few months to bolster sales and recoup investment so long as the austerity measures remain in place," Huang added.

New home sales during the first 29 days of January stood at 205,000 square meters, according to Uwin statistics.