ENG-2003 — Page 95

THE ECONOMY

premises in popular locations and in better-managed shopping malls fared much better. On a quarter-to-quarter comparison, rentals for shopping space, on average having fallen by 3 per cent and 6 per cent respectively in the first and second quarters of 2003, rose back by 1 per cent and 3 per cent in the third and fourth quarters. For 2003 as a whole, there was on average a 5 per cent decline. The sales market performed better, as investor interest grew keener in the second half of the year. There were reportedly a number of transactions involving short-term re-sale with profits. On a quarter-to-quarter comparison, prices for shopping space on average went higher by 1 per cent, 2 per cent and 9 per cent respectively in the second, third and fourth quarters of 2003, after a 2 per cent decrease in the first quarter. For 2003 as a whole, there was on average an increase of 10 per cent. Compared with the peak levels in the third quarter of 1997, prices and rentals for shopping space in the fourth quarter of 2003 plummeted by an average of 53 per cent and 30 per cent respectively.

On industrial property, the rental market remained generally depressed in 2003. Demand for conventional flatted factory space continued to be undermined by the further contraction in local manufacturing activity. Modern industrial premises that could be used as back-up service centres also faced competition from office space in the fringe areas, as rentals for such office space fell to an even lower level. On a quarter-to-quarter comparison, rentals for industrial space on average eased by 2 per cent, 7 per cent and 3 per cent respectively in the first three quarters of 2003, but rose again by 3 per cent in the fourth quarter. For 2003 as a whole, rentals for industrial space on average dipped by 9 per cent. As to the sales market, support came mainly from projects involving the conversion of industrial sites to hotel use amidst the rebound in inbound tourism. On a quarter-to-quarter comparison, prices for industrial space on average went up by 1 per cent and 3 per cent respectively in the third and fourth quarters of 2003, after nil change in the first quarter and a decline of 3 per cent in the second quarter. For 2003 as a whole, prices for industrial space were on average virtually unchanged. Against their respective peak levels in 1994, prices and rentals for industrial space in the fourth quarter of 2003 slumped by an average of 68 per cent and 51 per cent respectively.

On supply of new property, completions of private residential flats decreased by 14 per cent to 29 115 units in 2003, in stark contrast to the 30 per cent increase in 2002. Completions of new office space increased substantially further by 80 per cent to 299 000 square metres in 2003, after a surge of 117 per cent in 2002. On the other hand, completions of shopping space shrank by 15 per cent to 118 000 square metres in 2003, after a 5 per cent rise in 2002. As to industrial property, there was no completion of conventional flatted factory space in 2003, following a plunge of 91 per cent to 3000 square metres in 2002. Completions of industrial-cum-office space amounted to 15 000 square metres in 2003, after no completion in 2002.

Overall property transactions, as measured by agreements for sale and purchase of property registered with the Land Registry, rose by 2 per cent both in number and total value in 2003. These reversed the corresponding decreases of 3 per cent and 4 per cent in 2002. The increase was concentrated in the second half of the year, reflecting revival in the property market. Analysed by main type of property, transactions in residential property fell slightly by 2 per cent in number but were unchanged in total value in 2003. Meanwhile, transactions in non-residential property increased both in number and total value, by 22 per cent and 15 per cent respectively (Chart 15).

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