ENG-2012 — Page 78

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The Economy

The Property Market

With abundant liquidity, exceptionally low interest rates and a tight demand-supply balance of flats, the residential property market was buoyant during most of 2012. After entering the year on a soft note, the market picked up momentum from February, with sentiment reaching a high in September upon the announcement of another round of monetary easing measures by the US Federal Reserve and other central banks in the major advanced economies. The market showed some cool off in November and December after the Government announced the enhanced Special Stamp Duty to further curb speculation, and the Buyer's Stamp Duty to manage demand from non-local buyers.

Reflecting the upbeat sentiment throughout most of the year, overall flat prices in the fourth quarter of 2012 surged by 24 per cent over a year earlier and overall flat rentals rose by 10 per cent. Following the surge since mid-2009, overall flat prices in the fourth quarter of 2012 were 33 per cent above the peak in 1997, and overall flat rentals were also 8 per cent above the peak (Chart 14).

Chart 14

Index

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200

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160

140

120

100

80

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Prices and Rentals of Residential Property

(1999=100)

Price index

Rental index

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

2008

2009

2010

2011

Both flat prices and rentals surged further.

2012

Residential property transactions gradually gathered momentum from February, before plummeting to very subdued levels in November and December. There were 81,333 sale and

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