ENG-2018 — Page 84

Chart 11

Index

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The Economy

Prices and Rentals of Residential Property (Jan 2014=100)

Nov 2016

Price index

Rental index

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

2014

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2015

2016

2017

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2018

Flat prices registered a decline from August, while rentals also fell towards the end of 2018.

Notwithstanding the recent decline, flat prices in December 2018 exceeded their 1997 peak by 108 per cent. The index of home purchase affordability' was around 69 per cent in the fourth. quarter, still significantly above its long-term average of 44 per cent over 1998-20172. Should interest rates rise three percentage points to a more normal level, the ratio would soar to 90 per cent.

The demand-supply balance of private-sector flats remained tight for the time being despite some improvement during 2018. The vacancy rate rose from 3.7 per cent at end-2017 to 4.3 per cent at end-2018, still below the long-term average of 5 per cent over 1998-2017. Reflecting the government's sustained efforts to increase land supply, the private sector's total supply of flats in the coming three to four years - comprising unsold flats of completed projects, flats under construction but not yet sold and flats on disposed sites where construction can start any time - would stay at a high of 93,000 units as estimated at end-2018.

Over the past several years, the government has also put forward demand-management and macro-prudential measures to dampen speculative, investment and non-local demand, and to reduce the possible risks to financial stability arising from an exuberant property market. These measures have yielded notable results.

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The ratio of mortgage payment for a 45 square metre flat to median income of households, excluding those living in public housing.

The historical data on the index of home purchase affordability has been revised to reflect the revision to income statistics in the General Household Survey,

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