56 The Economy
Chart 14
Prices and Rentals of Office Space (1999=100)
Index
240
220
200
180
160
Price index
140
120
100
80
60
40
20
0
Rental index
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2004
2005
2006
2007
2008
Both prices and rentals of office space faced downward pressure in late 2008 amid the worsening business environment.
As for retail property, weaker retail sales resulting from a slowdown in inbound tourism and more cautious consumer spending dampened demand for shopping space. Overall prices for retail property in the fourth quarter of 2008 fell by 6 per cent from a year earlier, whereas rentals also edged down by 1 per cent over the same period after staying fairly steady earlier in the year. With the lackluster export outlook adversely affecting demand for industrial property, sale prices and rentals for flatted factory space in the fourth quarter were 11 per cent and 4 per cent lower than those in the third quarter respectively. Yet compared with a year earlier, prices were down by only 1 per cent, while rentals actually managed to record a 2 per cent increase thanks to the sturdy performance in the first half of 2008.
On the supply side, completions of private residential flats fell by 16 per cent to 8 800 units in 2008, which was a major factor contributing to the stable vacancy rate between end-2007 and end-2008 at 4.9 per cent. In regard to the potential supply of new private residential flats, it was estimated that the number of unsold completed flats and flats already under construction but not yet sold, together with the number of flats on disposed sites where construction has yet to commence, would be around 64 000 units in the next few years. This will be equivalent to about 3.5 times the average annual take-up of residential units between 2004 and 2008.
Regarding non-residential property, the supply for office space increased further to 341 000 square metres in 2008 from 320 000 square metres in 2007. This notwithstanding, the vacancy rate for office space still fell from 8.9 per cent at end- 2007 to 8.4 per cent at end-2008, reflecting the strong space take-up in the early part of the year. Moreover, the vacancy rate in the core districts remained lower than the market average, as the new supply was mostly found in the non-core