THE ECONOMY
in the local stock market, the effect of continued abundant new housing supply, and the increased volume of flats held as collaterals by the banks being put on sale following the loan defaults. Sentiment stayed subdued by the end of November, even with the Government's further clarification of its land and housing policy objectives. Towards the end of the year, several major property developers enlarged the price discounts on their remaining stock of new flats in a move to promote primary sales, which in turn tended to dampen transactions in the secondary market further.
On a quarter-to-quarter comparison, flat prices on average rose by 2 per cent in the first quarter of 2000, but this was more than offset by the decreases in the subsequent three quarters, by 7 per cent, 3 per cent and 4 per cent respectively. For 2000 as a whole, flat prices fell by 12 per cent. Flat rentals edged up by 1 per cent in 2000, with the increase occurring almost entirely during the first half of the year. They were, however, largely static during the second half. Compared with the respective peaks in the third quarter of 1997, flat prices and rentals in the fourth quarter of 2000 were both substantially lower, by 51 per cent and 29 per cent respectively.
Chart 15
Index (1999-100)
250
Property prices and rentals (office space)
200
150
Rental index
100
50
0
Price index
T
60
QI Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1995 1
1996
1997
1998
1999
2000
The rentals for office space resumed an uptrend in 2000, in contrast to continued softening in the prices for office space.
On commercial property, the rental market for office space staged an upturn in 2000, as the respective leasing demand was resurrected upon the strong economic recovery and in anticipation of China's forthcoming accession to the World Trade Organisation. Grade A office space in the Central Business District was in keen demand, especially from financial services firms. As to the sales market for office space, while more trading activity occurred in 2000, the prices fetched remained soft. For 2000 as a whole, prices for office space fell by 13 per cent, but rentals for office space went up by 5 per cent. Against their peak levels in 1997, prices and rentals for