ENG-2019 — Page 86

Chart 11

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3

The Economy

Prices and Rentals of Residential Property

(Jan 2015=100)

Index

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

2015

2018

[

I

2016

2017

2019

Flat prices generally softened from June 2019 onwards, and rentals also shifted to a decline in the latter part of the third quarter.

Mainly reflecting the rally in the past few years, flat prices in December 2019 exceeded the 1997 peak by 119 per cent. The index of home purchase affordability' stayed elevated at around 72 per cent in the fourth quarter, significantly above the long-term average of 44 per cent over 1999-20182. Should interest rates rise three percentage points to a more normal level, the ratio would soar to 93 per cent.

Reflecting the government's sustained efforts in raising 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 level of 93,000 units as estimated at end- 2019. For the time being, the demand-supply balance of private-sector flats remained tight. The vacancy rate fell from 4.3 per cent at end-2018 to 3.7 per cent at end-2019, staying below the long-term average of 5 per cent over 1999-2018.

Over the past several years, the government has also implemented demand-side management and macro-prudential measures to dampen speculative, investment and non-local demand,

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

public housing.

2

Starting from the fourth quarter of 2019, the index of home purchase affordability is calculated based on, among other components, the mortgage rates of new loans with reference to both the best lending rate (BLR) and the Hong Kong Interbank Offered Rate. The index for the third quarter of 2019 has also been revised retrospectively based on the revised mortgage rates. As such, the third and fourth-quarter data may not be strictly comparable with those in previous quarters, which were based on the mortgage rates of new loans with reference to the BLR only.

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