ENG-1999 — Page 84

THE ECONOMY

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rentals in the fourth quarter of 1999 were both substantially lower, by 46 per cent and 30 per cent respectively.

On commercial property, the sales market for office space remained subdued for most of 1999, amidst an abundant supply relative to demand. Also relevant was the generally stringent mortgage lending policy being maintained by the banks for such property. Yet towards the year-end, there was an apparent pick-up in trading activity, reportedly due to acquisition of office space by some overseas investors. In the leasing market, office rentals declined for most of 1999, but the downtrend seemed to have been arrested by the year-end. For 1999 as a whole, prices for office space fell by 13 per cent, and rentals for office space by 19 per cent. Against their peak levels in 1997, prices and rentals for office space in the fourth quarter of 1999 were both sharply down, by 58 per cent and 40 per cent respectively.

On shopping space, the leasing market was broadly stable in 1999. End-user demand improved gradually over the course of the year, upon a steady pick-up in retail business. Yet the sales market for shopping space remained quiet, as investors generally stayed on the sideline in face of an ample supply. For 1999 as a whole, prices and rentals for shopping space fell by 13 per cent and 5 per cent respectively. Against their peak levels in the third quarter of 1997, prices and rentals for shopping space were markedly reduced in the fourth quarter of 1999, by 54 per cent and 19 per cent respectively.

The market for industrial property was sluggish throughout 1999, amidst the continued relocation of production processes outside the SAR. Yet reportedly, the end-user demand for modern multi-purpose industrial premises resurrected somewhat in the latter part of the year, in tandem with the pick-up in export trade. Also partly contributing was an increased take-up of such premises for start-up of hi-tech activities. For 1999 as a whole, prices and rentals for industrial property fell on average by 18 per cent and 10 per cent respectively. Against their peak levels in 1994, the respective prices and rentals were lowered considerably, by 59 per cent and 36 per

cent.

Planned developments of property recovered to a 2 per cent increase in 1999, from a 28 per cent decline in 1998. Within this total, planned developments of both residential property and industrial property increased, while those of commercial property decreased.

Consumer prices

Consumer prices showed a distinct easing in 1999, as the downward adjustment in costs and prices in the local economy continued. Retail prices for a wide range of consumer goods and services exhibited a larger decrease, reflecting the substantial price discounts and other inducements offered by retailers amidst keen competition in the retail market. Consumers had also become more price sensitive. At the same time, there was a continued freeze in government fees and in a number of public utility charges, while a 50 per cent cut in the rates payable was granted for the third quarter. Meanwhile, inflation in the major supplier economies remained low or even negative. This helped to keep the prices of retained imports down in overall terms for most of the year. Yet as the prices of some major commodities in the world market took a visible upturn in the latter part of the year, the prices of retained imports rebounded towards the year-end.