RENTS for grade A office space in Exchange Square - reputed to be among the highest in the world - may be halved by 1996, says Vigers Hong Kong managing director Gareth Williams. Mr Williams said sale prices of grade A office space would drop by as much as 20 per cent this year and he expected rents would follow suit, dropping by as much as 15 per cent for the year. Reviewing last year's property market yesterday, Mr Williams predicted a bear market and said rents could be expected to fall a further 15 per cent in 1996. He said rents were falling in Central because of a lack of demand and landlords were now fighting to keep the tenants they had. 'Eventually what you're going to see is a halving of the rents that people are paying in Central down to $60 per square foot,' he said.' Mr Williams described owners of office space as 'willing to bargain' and offered long completion dates in this sluggish environment. To draw buyers back to the market, prices would have to drop to where investors made yields of at least seven to eight per cent, he said. Mr Williams said the price of luxury flats probably would fall another 15 per cent during the year. 'I don't think there is any major concern,' he said. 'It is just the normal end of the cycle. There is no fear of a collapse.' During his year-end review Mr Williams said buyer sentiment was still strong, but that home buyers were reluctant to buy until yields reached at least seven per cent. He said mass residential prices would continue on their downward path this year by another five to 10 per cent. He said new home buyers had not seen the last of developers knocking down the prices of flats. To spur sales, some developers had slashed prices by as much as 20 per cent in the more remote areas of the New Territories. Mr Williams predicted a further 20 per cent cut in the cost of floor space this year in these developments. 'There is no rental market, so they [the developers] have to slash prices. So they have to cut 10 to 20 per cent to stimulate people. The latent demand is there.' Prices for these flats would hit a plateau over the Lunar New Year and then be slashed again. 'This will stimulate demand and allow yields to go up.' Mr Williams said falling prices would push the banks to ease their mortgage lending restrictions. 'We are beginning to see the relaxing of mortgage lending rules now.' Initially banks were worried prices were going through the roof so they installed curbs on lending, he said. So with prices dropping, 'we are likely to see a relaxation on mortgages'. Mr Williams said the government should give the banks 'the nod' to ease up on their lending rules, which only provide a 70 per cent mortgage lending. However, other measures introduced to cool off the property market were not necessarily bad, he said.