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Determinants of Property Prices in Hong Kong SAR

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  • R. Sean Craig
  • Changchun Hua
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    Abstract

    This paper uses an econometric model of residential property prices in Hong Kong SAR to assess the effectiveness of alternative policies in slowing the increase in property prices. The rapid rise in property prices is well explained by macroconomic fundamentals; real GDP per capital, real domestic credit, construction costs, land supply, and the real interest rate. Policy can influence the property market though land supply and prudential and tax policy, with the latter policies taking the form of a stamp duty on property transactions and a tighter loan-to-value ratio (LTV) on lending. Land supply is the most effective policy insturment for restraining property price increases but it operates with a significant lag. The LTV and stamp duty dampen speculative activity that drives up property prices. While these policies can slow the increase in the short run, they should be guided by their long run objectives of financial stability and counteracting speculation.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/277.

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    Length: 15
    Date of creation: 01 Nov 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/277

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    Related research

    Keywords: Economic models; Housing prices; Price increases; residential property; equation; standard errors; cointegration; standard deviation; equations; statistic; kurtosis; statistical tests; autocorrelation; descriptive statistics; standard deviations; statistics; dummy variables;

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    References

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    1. Giovanni Dell'Ariccia & Pau Rabanal & Christopher W. Crowe & Deniz Igan, 2011. "Policies for Macrofinancial Stability," IMF Staff Discussion Notes 11/02, International Monetary Fund.
    2. Neng Lai & Ko Wang, 1999. "Land-Supply Restrictions, Developer Strategies and Housing Policies: The Case in Hong Kong," International Real Estate Review, Asian Real Estate Society, vol. 2(1), pages 143-159.
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    Cited by:
    1. Tillmann, Peter, 2013. "Capital inflows and asset prices: Evidence from emerging Asia," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 717-729.
    2. Yiu, Matthew S. & Yu, Jun & Jin, Lu, 2013. "Detecting bubbles in Hong Kong residential property market," Journal of Asian Economics, Elsevier, vol. 28(C), pages 115-124.

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