56 The Economy
pace. Comparing the fourth quarter of 2009 with the same period in 2008, rentals posted an overall increase of 2 per cent (Chart 14).
Chart 14
Prices and Rentals of Residential Property
(1999=100)
Index
140
120
100
80
60
40
20
20
Price index
Rental index
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2005 I
2006
2007 1 2008
2009
Both prices and rentals of residential property went up in 2009 amid gradual improvement of the economy and a low interest rate environment.
The surge in residential property prices during 2009 was largely a bounce-back from the significant drop during the second half of 2008, and overall home prices in the fourth quarter were only 5 per cent above the peak before the global financial crisis. The market remained largely end-user led, with nearly 90 per cent of secondary market transactions in 2009 involving flats smaller than 70 square metres. Furthermore, the home purchase affordability (i.e. the ratio of mortgage payment for a 45 square metre flat to median household income) stayed healthy at around 38 per cent in the fourth quarter, lower than the average of 53 per cent in the past 20 years. While the figure was to some extent held down by the exceptionally low mortgage rates, it indicated that the market was still reasonably healthy.
Nevertheless, the Government is mindful of the possible effect of sharp fluctuations in property prices on macroeconomic and social stability. With a view to ensuring a healthy and stable development of the property market, and forestalling any possible formation of a property bubble, the authorities set out a number of measures in October and November 2009. To prevent excessive expansion in mortgage lending, in October 2009 the Hong Kong Monetary Authority advised banks to cap the loan-to-value ratio at 60 per cent for residential properties valued at $20 million or more, and reminded lenders to be more prudent in processing mortgage loan applications. To improve the transparency of the property market, in November 2009 the Government shortened the lead time for developers to make public details of transactions, and required developers to list the price per square
No comments yet.
Private notes are available after approval.