The favourable land auction results in March also signalled a better market sentiment. The intensive sales promotion programmes launched by developers aroused much interest.
During the first quarter, response to primary sales of flats by developers was enthusiastic, despite higher prices being fetched in successive batches of sale. Activity and flat prices in the secondary market likewise picked up.
At the end of March 1996, prices in selected major residential developments rebounded by around 13% from the low in October 1995, although they were still about 17% lower than the peak in April 1994. Rentals for new leases of flats were generally stable, except those for large flats which probably showed a modest decline.
On commercial property, there was increased trading in some of the more prominent office premises in recent months. The rental market for office space was however still undergoing correction, with continued easing in rentals in the secondary
areas.
Sales and leasing activity in shopping space showed a mixed performance, with premises in the prime urban areas faring better than those in the secondary areas.
Demand for industrial property continued to be dampened by the progressive relocation of production processes to China. Coupled with a large supply of industrial-cum-office premises in the pipeline, prices for flatted factory premises came under further downward pressures, while rentals remained soft.
Consumer price inflation remained on a generally moderating trend. The Consumer Price Index (A) rose by 6.4% in the first quarter of 1996 over a year earlier, the slowest quarterly increase since the third quarter of 1987. This followed increases of 9.3% in the first half of 1995 and 8.1% in the second half.
CPI(B) and Hang Seng CPI showed broadly similar trends. Taking the three indices together, the Composite CPI decelerated to a 7.1% increase in the first quarter of this year, from 9.7% in the first half and 8.6% in the second half of last year.
Domestically-generated inflationary pressures continued to moderate, as the earlier consolidation in the labour and the property markets resulted in less rapid increases in wages and rentals. Imported inflation was also alleviating, helped by the stronger US dollar and lower inflation in China.
On a year-on-year comparison, the rates of increase in world commodity and product prices were still generally receding.
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