XN000022-1996-08-30 — Page 8

By end-June 1996, prices in selected major residential developments were, on average, 20% higher than the low in October 1995, albeit still 11% below the peak in April 1994. Rentals were on the whole stable.

On commercial property, the sales market for office space showed some signs of recovery in the first half of 1996. While investment interest in Grade A office space in prime locations revived noticeably, that in ordinary office space in less prominent locations remained subdued.

Office rentals eased further, before tending to stabilise towards the middle of the year. Rentals for shopping space remained generally soft in the first half of 1996. But trading in shopping space in prime locations with a higher rental yield had become more active.

The market for industrial property remained sluggish in the first half of 1996. Demand for conventional flatted factory space continued to be dampened by the progressive relocation of manufacturing processes outside Hong Kong.

In face of a large supply of industrial-cum-office premises in the pipeline, acquisition interest for such premises was held back and rentals fell further.

Inflation

Consumer price inflation remained generally stable at a relatively moderate level in the first half of 1996. CPI(A) had a year-on-year rate of increase of 6.4% by reference to the old 1989/90-based series (or 6.2% by reference to the new 1994/95- based series) in the first quarter, followed by an increase of 6.6% (6.4%) in the second quarter.

Taken together, CPI(A) rose by an average of 6.5% (6.3%) in the first half of this year, which was significantly slower than the increases of 9.3% in the first half and 8.1% in the second half of last year. CPI(B) showed broadly similar movements.

While the Hang Seng CPI also showed a slower increase in the first half of 1996 compared with the first and second halves of 1995, unlike the CPI(A) and CPI(B) its rate of increase was less rapid in the second quarter than in the first quarter of 1996.

A more appreciable slow-down in the rate of increase in rentals of larger flats more than offset the impact of higher food prices on the Hang Seng CPI.