ENG-2003 — Page 92

THE ECONOMY

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terms in September 2003 than a year earlier. In real terms, the corresponding decreases were 2.3 per cent and 1.3 per cent. Wages in transport services and in the wholesale, retail and import/export trades fell less, by 1.6 per cent and 1.5 per cent respectively in money terms. In real terms, there were still increases by 1.1 per cent and 1.3 per cent. Wages in financing, insurance, real estate and business services had an even smaller decline by 0.3 per cent in money terms, and thus a larger increase by 2.5 per cent in real terms. As to the local manufacturing sector, wages continued to fall, by 3.7 per cent in money terms or 1.0 per cent in real terms in September 2003 over a year earlier.

The Property Market

The property market as a whole showed a distinct turnaround in 2003, mostly occurring in the latter part of the year, from the general sluggishness in the past few years. The markets for residential property and shopping space both staged a noticeable upturn in the second half of the year, along with improved performance of the overall economy and rally in the stock market. The signing of CEPA in June and implementation of the Individual Visit Scheme for Mainland visitors to Hong Kong in July also contributed. The market for office space likewise turned better towards the end of the year.

More specifically, the sales market for private residential property remained sluggish in the first half of 2003, but rebounded distinctly in both transaction volume and prices in the second half of the year. Following the Government's promulgation of nine policy measures to stabilise the housing market in late 2002, transactions had a brief pick-up in early 2003, but slackened subsequently amidst renewed worries over job security and income stability. Acquisition interest was curtailed further during the period from mid-March to early June, upon the impact of SARS. The ample supply of new flats in the mass market continued to cause a drag. Nevertheless, market sentiment started to improve in early June, boosted by an improved outlook for the economy and a more sanguine global economic environment. This was particularly so after the signing of CEPA in June and implementation of the Individual Visit Scheme for Mainland visitors to Hong Kong in July. The announcement by the Government in October of further measures to engender steady development of the housing market also helped. Developers actively resumed sales in the primary market, which generally received a good response. This led many developers to reduce or withdraw the price discounts and other concessions offered earlier. Meanwhile, activity in the secondary market also took a notable upturn. Flat prices bottomed out in the third quarter, and bounced up visibly in the fourth quarter. In the luxury end of the market, strong buying interest re-emerged in the latter part of the year, leading to a more pronounced rebound in prices. The Government's new policy measure to attract investment immigrants to Hong Kong may have rendered some lift to this segment.

On a quarter-to-quarter comparison, flat prices on average drifted lower by 4 per cent, 5 per cent and 1 per cent respectively in the first three quarters of 2003, but rebounded to an increase of 8 per cent in the fourth quarter. For 2003 as a whole, while flat prices on average still fell by 1 per cent, this was much narrowed from the 12 per cent drop in 2002. Yet, compared with the peak level in the third quarter of 1997, flat prices in the fourth quarter of 2003 remained substantially lower, by an average of 62 per cent.