Guangzhou Lands and Housing Administration Bureau says 8.8 billion yuan (about HK$8.18 billion) worth of flats were sold in the first half of the year. Bureau chief Li Weijie said this was a rise from the monthly average of 1.2 billion yuan of sales last year. The volume of transactions rose by 39 per cent in the first half, while prices increased 7 per cent, he said. The bulk of the sales came in the middle to low-end price range which was affordable to local residents. Mr Li said flats in low-rise blocks, priced at 464.5 yuan per square foot and in areas not too remote, were the most popular. 'Anything that is 929 yuan or more per sq ft would be hard to sell,' he said. Zhu Xiaoling , deputy chief of the bureau's transaction department, said there were more high-rise residential blocks in Guangzhou's old districts of Dongshan, Yuexiu and Liwan. High-rise flats in these districts could cost as much as 929 yuan per sq ft while the few low-rise flats were priced at 650.3 yuan per sq ft. 'Local residents would prefer flats priced at about 371.6 yuan per sq ft even though they could be on the outskirts of the city,' Ms Zhu said. Mr Li said the high construction costs of flats was the main problem facing the Guangzhou market. Many projects had been signed for before Beijing tightened credit and, as a result, the size of the main group of buyers - state-owned enterprises and work units - had dwindled. But with better mortgage facilities and housing reforms taking shape, developers have begun to focus on individual buyers rather than state-owned enterprises and large firms. The bureau said it had 2,662 applications for mortgages in the first half of the year, compared with a monthly average of 100 applications last year. The Guangzhou branch of the China Construction Bank said 114 developers had signed agreements with the bank to provide mortgages for their residential projects. Mortgages for Guangzhou residential properties used to be exclusive business for foreign, especially Hong Kong, banks. But in the past couple of years, the number of domestic banks in this business has risen from six to 11. Mr Li said the government's plan was to speed up development of low-cost housing and anju flats. 'Currently, there is an excess supply of offices in Guangzhou. But a balance between demand and supply should be struck by next year,' he added.