Home rentals driving up consumer prices

Dennis Eng

Rising rentals for housing will continue to be the main factor driving up consumer prices, which rose by 1.9 per cent year on year in April and are expected to climb steadily in the coming months, economists say.

Last month's increase in the consumer price index tops the 1.6 per cent inflation recorded in March. April's figure was slightly below the consensus estimate of 2 per cent.

Public and private housing, which accounts for almost 30 per cent of the index, increased by 4.9 per cent, of which private housing rentals jumped by 5.9 per cent in April. In March, housing rose by 4.3 per cent while private rentals increased by 5.3 per cent. Leases signed during the property market trough amid the Sars outbreak in 2003 are coming up for renewal now, with significant increases expected.

'The rise in private housing rentals continued to feed through to consumer price indices to a greater extent,' a government spokesman said.

'Looking ahead, consumer price inflation is likely to creep up amid the economic upturn. The recent renewed weakening of the US dollar may also increase price pressure in the period ahead.

'Yet rapid growth in labour productivity and continuous expansion in production capacity should continue to provide an offset.'

Standard Chartered Bank economist Tai Hui said inflation was still fairly benign but he was expecting increases in consumer prices to creep past 2 per cent over the next few months, led by housing rentals.

The Census and Statistics Department says higher prices for fresh vegetables as well as package tours helped boost inflation last month. Charges for electricity, gas and water also rose, by 4.1 per cent.

Miscellaneous goods and services, food and transport showed relatively mild inflation of between 1 per cent and 2 per cent.

Prices of other goods fell, including alcohol and tobacco, down 6.7 per cent, durable goods, which dropped by 6.3 per cent, and clothing and footwear, which dipped 2 per cent.