TNAG-0621-FCO40-769-Budget-of-Hong-Kong-1977 — Page 133

G.F. 323

51.

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A further reflection of the growth in demand in the private

25.

sector was that the amount of vacant factory space was less at the end of

1976 than at the end of any year since 1971. Vacant office space also

reflects this growth in demand. The stortage of office space in the early

seventies and excessive optimism about future increases in office rentals

led to a large share of property development being concentrated on the

building of more offices at that time. The consequence was an inevitable

over supply of offices starting as early as 1973 and developing in 1974

and 1975. But during 1976, there was a substantial

accommodation.

take up of office

Vacent office space by the end of 1976 was less than at

the end of 1975, despite a fairly large amount of additional office floor

space made available during the year.

Building and construction costs

52.

The fact that building and construction in 1976 was roughly

back to a level consistent with overall economic activity does not

necessarily imply that the property market was in equilibrium. If

continued growth in the demand for building and construction activity

exceeds the growth in the capacity of the building and construction

industry (as may be the case in the late seventies), prices are likely

to increase rapidly. Time lags in the system coupled with expectations

of further price increases will tend to exaggerate these movements.

53.

An indication of the movements in construction prices is

given in table 27 and diagram 8. The tender price index is constructed

from successful tenders for public building projects whereas the labour

and material cost index is a weighted average of the movements in prices

of construction materials and in construction wages. Although the two

indexes, being designed for a specific use within the Public Work Department,

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/must

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