TNAG-0621-FCO40-769-Budget-of-Hong-Kong-1977 — Page 131

G.F. 323

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23.

real average annual rate of growth of 8% in the gross domestic product.

per annum

In consequence, by the early seventies, the excess supply of property

resulting from the 1961 to 1965 boom was exhausted, and there was

actually an excess demand. The construction industry reacted to this

excess demand at a time when the construction labour force had already

been reduced. So, because of the need to attract labour back into

construction, particularly from manufacturing, there were unprecedented

increases in construction wages in the region of 30%

during 1970 and 1971. These increases were reflected in property prices,

thus, increasing expectations of further price increases; and these

expectations themselves added to demand. Some of the excess demand for

property was discouraged as a result of the higher prices. On the other

hand, higher prices also stimulated construction companies to place large

orders for construction machinery. But, the gradual arrival of this

machinery coincided with the recession in 1974 and 1975 which obliged

management to reduce costs by more efficient use of labour and labour

had every incentive to respond. Thus capacity of the industry increased

substantially. Although building and construction activity increased

during these two years, these increases did not take up much of the

substantially expanded capacity.

*

+

Building and construction 1975 to 1976

48.

The economic recovery in the second half of 1975 and in 1976

renewed prospects for the property market. The excess capacity in the

construction industry made possible an increase of 40% in real terms in

building and construction activity between 1975 and 1976 (to give average

annual rate of increase of 16% between 1969 and 1976 compared with 7% in

real terms for the gross domestic product). The fact that between 1961

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