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Detecting Bubbles in Hong Kong Residential Property Market

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Author Info

  • Matthew S. Yiu

    (ASEAN+3 Macroeconomic Research Office)

  • Jun Yu

    (Sim Kee Boon Institute for Financial Economics, Singapore Management University)

  • Lu Jin

    (Hong Kong Monetary Authority)

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Abstract

This study uses a newly developed bubble detection method (Phillips, Shi and Yu, 2011) to identify real estate bubbles in the Hong Kong residential property market. Our empirical results reveal several positive bubbles in the Hong Kong residential property market,including one in 1995, a stronger one in 1997, another one in 2004, and a more recent one in 2008. In addition, the method identifies two negative bubbles in the data, one in 2000 and the other one in 2001. These empirical results continue to be valid for the mass segment and the luxury segment. However, the method finds a bubble in early 2011 in the overall market as well as in the mass segment but not in the luxury segment. This result suggests that the bubble in early 2011 in the Hong Kong real estate market came more strongly from the mass segment under the demand pressure from end-users of small-to-medium sized apartments.

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Bibliographic Info

Paper provided by Sim Kee Boon Institute for Financial Economics in its series Working Papers with number CoFie-03-2012.

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Length: 21 Pages
Date of creation: May 2012
Date of revision:
Publication status: Published in SMU-SKBI CoFie Working Paper
Handle: RePEc:skb:wpaper:cofie-03-2012

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Keywords: asset bubble; residential property prices; right-tailed unit root test; explosive behaviour; price-to-rent ratio;

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  1. Peter C.B. Phillips & Yangru Wu & Jun Yu, 2009. "Explosive Behavior in the 1990s Nasdaq: When Did Exuberance Escalate Asset Values?," Cowles Foundation Discussion Papers 1699, Cowles Foundation for Research in Economics, Yale University.
  2. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
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  21. Frank Leung & Kevin Chow & Gaofeng Han, 2008. "Long-term and Short-term Determinants of Property Prices in Hong Kong," Working Papers 0815, Hong Kong Monetary Authority.
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Cited by:
  1. Gustavo Adolfo HERNANDEZ DIAZ & Gabriel PIRAQUIVE GALEANO, 2014. "Evolución de los precios de la vivienda en Colombia," ARCHIVOS DE ECONOMÍA 011208, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
  2. Marcelo M. de Oliveira & Alexandre C. L. Almeida, 2014. "Testing for rational speculative bubbles in the Brazilian residential real-estate market," Papers 1401.7615, arXiv.org.

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