ENG-2020 — Page 82

Chart 11

3

The Economy

Prices and Rentals of Residential Property (Jan 2016=100)

Index

170

Nov 2016

160

150

140

130

120

110

100

00

90

Price index

Rental index

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

2016

2020

2017

2018

2019

Flat prices did not show much change for 2020 as a whole, while rentals consolidated further.

Flat prices in December 2020 exceeded the 1997 peak by 120 per cent. The index of home. purchase affordability' remained elevated at around 72 per cent in the fourth quarter, significantly above the long-term average of 45 per cent over 2000-20192. Should interest rates rise three percentage points to a more normal level, the ratio would soar to 94 per cent.

Reflecting the government's sustained efforts in raising land supply, the total supply of flats in the private sector 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 92,000 units as estimated at end-2020. The demand-supply balance of private flats stayed tight despite some relative improvement during 2020. The vacancy rate rose from 3.7 per cent at end-2019 to 4.3 per cent at end-2020, yet still below the long-term average of 4.9 per cent over 2000-2019.

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, and to reduce the possible risks to financial stability arising from an exuberant property market. These measures have yielded notable results.

2

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

Starting from the third 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. As such, the data from the third quarter of 2019 onwards 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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