60 The Economy
prices in the fourth quarter of 2005 were still 8 per cent higher than a year earlier. During the same period, flat rentals increased steadily by 12 per cent, along with progressive improvement in leasing demand (Chart 13).
Chart 13
140
Index
Prices and rentals of residential property
(1999=100)
120
100
Rental index
80
60
40
20
0
Price index
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
2005
Flat prices rose to a five-year high in the second quarter but eased back later as market sentiment was overwhelmed by accelerated interest rate hikes. Flat rentals moved up steadily amid solid user demand.
Similarly, market sentiment on non-residential properties turned more cautious in mid-2005 under the influence of higher interest rates, but there was less pressure to moderate prices. In the sales market for office space, prices eased back by only 1 per cent in the fourth quarter from the third quarter, after rising for nine consecutive quarters. Market confidence was supported by strong leasing demand along with the continued expansion in business activities. A-grade office rents in particular, showed a marked rise. Rents were also affected by anticipation of limited new office supply in prime locations in the near future. In the fourth quarter of 2005, the price of office space leaped by 21 per cent over a year earlier. Rentals moved up even more over the same period, by 29 per cent in overall terms and by 36 per cent for A-grade office space (Chart 14).
Page 90Page 91
Chart 14
160
140
120
100
Index