ENG-2004 — Page 92

62 The Economy

Chart 13

140

120

100

80

60

40

20

0

Index

Prices and rentals of residential property (1999=100)

Rental index

Price index

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1999

2003

2004

2000

2001

2002

Having reverted to increase in the latter part of 2003, flat prices bounced up markedly further over the course of 2004, mainly underpinned by the distinct upturn in the overall economy and the end of the deflationary era. Flat rentals also picked up, albeit less rapidly.

On commercial property, bolstered by keen investor interest amid an optimistic business outlook, the sales market for office space picked up sharply in the first quarter of 2004 and stayed buoyant in the second quarter. It then went through a brief consolidation in the third quarter owing to uncertainties in the external environment, but bounced back swiftly in the fourth quarter as local business activity continued to prosper. By the fourth quarter of 2004, prices for office space on average have surged by 65 per cent from a year earlier. Office rentals also picked up during most of 2004, with rentals of Grade A office space registering the strongest increase. There was ongoing upgrading and relocation of office space from the fringe areas to quality premises in the prime locations, as rentals of Grade A office space. had fallen to an attractive level and as business activity saw further growth. In the fourth quarter of 2004, office rentals were up by an average of 12 per cent over a year earlier. Against their respective peak levels in 1994, prices and rentals for office space in the fourth quarter of 2004 were lower by an average of 53 per cent and 57 per cent (Chart 14).