ENG-2006 — Page 86

58 | The Economy

Chart 14

Index

160

140

120

Prices and rentals of office space (1999=100)

100

Rental index

80

60

Price index

40

109

20

0

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

2002

2003 |

2004

2005

2006

Office rentals surged further during 2006, alongside the general trend of business expansion. But the increase in office prices slowed visibly as investors became more prudent after the earlier buoyancy.

As for supply of new properties, completions of new private residential flats fell slightly by 4 per cent to 16 600 units in 2006. Taking into account the number of unsold units in completed projects and in to-be-completed projects, it is estimated that the potential supply of new private residential flats will be in the region of 69 000 flats in the next three to four years. This is more than three times the average number of primary flats sold during 2002-06. Compared with end-2005, the vacancy rate of private residential property slipped to 5.9 per cent in 2006.

Regarding non-residential properties, completions in terms of internal floor area surged by 97 per cent to 318 400 square metres in 2006, with the increase concentrated in office and retail spaces. Yet as demand increased notably, the vacancy rate fell across-the-board to 7.7 per cent for office space, 9.8 per cent for retail space, 7.2 per cent for flatted factory space and 6.9 per cent for industrial-cum- office space.

The number of property transactions, in terms of agreements for sale and purchase of property registered with the Land Registry, declined by 20 per cent both in volume and value in 2006. Transactions in residential property fell by 20 per cent in volume and 26 per cent in value. The decrease occurred mainly in the first half of 2006 while the second half witnessed a modest rebound as sentiment improved as a result of the pause in US interest rate increases which had been occurring since August. As regards non-residential property, transactions fell markedly by 18 per cent in 2006. But there was a marginal rise of one per cent in value, mainly due to certain big-ticket transactions for office and industrial properties during the year (Chart 15).