ENG-2011 — Page 99

Chart 13

10

8

6

4

2

0

-2-

-4

-6

Labour Earnings

Year-on-year rate of change (Per cent)

In money terms

In real terms

The Economy | 63

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2002 2003 2004 2005

2006

2007 | 2008 | 2009 | 2010 | 2011

Labour earnings saw notable and broad-based improvements in both nominal and real terms in 2011.

As the earlier bullish sentiment switched to a more cautious tone, residential property prices in December 2011 fell by 4 per cent from the peak in June, but still rose by a rather notable 11 per cent over a year earlier due to the hefty gain in the early part of the year. Overall flat rentals in December rose by 7 per cent over a year earlier, though with most of the gain concentrating in the first ten months. Following the surge since mid-2009, overall flat prices in December were 5 per cent higher than the peak in 1997, and overall flat rentals were only 3 per cent below the peak (Chart 14).

Residential property transactions came down to a less hectic level in the first half of 2011 following the introduction of the Special Stamp Duty in late 2010, and turned very subdued in the second half. For 2011 as a whole, the number of sale and purchase agreements for residential property received by the Land Registry plunged by 38 per cent from the high base in 2010 to 84 462, and total consideration by 21 per cent to $442.5 billion (Chart 15).

Despite the consolidation in the latter part of 2011, flat prices in December 2011 were still 73 per cent higher than the trough at end-2008. The home purchase affordability (i.e. the ratio of mortgage payment for a 45-square metre flat to median income of households, excluding those living in public housing) remained elevated at 46 per cent in the fourth quarter of 2011, and would exceed the long-term average of 50 per cent over 1991-2010 should interest rates return to a more normal level.