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Policy-Driven Housing Cycle: The Hong Kong Case of Supply Intervention

Author

Listed:
  • Gary Wai Chung Wong

    (Lingnan University)

  • Lok Sang Ho

    (Chu Hai College Higher Education)

Abstract

This paper builds on the literature that shows policy often plays a key role in housing cycles. Using the cointegration approach which focuses on the supply and demand dynamics of the housing market, and with explicit consideration of housing price expectations proxied by the price-earning ratio in financial markets, this paper identifies two cointegrating relations: a long run demand-side relation that involves housing property price, interest rate, price expectation and income; and a supply-side relation that involves private housing completion, property price, interest rate, and building and land costs. Based on Hong Kong data from 1990 a£á¡§ 2012, which covers big cycles in the housing market, this paper suggests that policies to augment or restrain housing supply in the attempt to stabilize housing prices have been counterproductive.

Suggested Citation

  • Gary Wai Chung Wong & Lok Sang Ho, 2017. "Policy-Driven Housing Cycle: The Hong Kong Case of Supply Intervention," International Real Estate Review, Global Social Science Institute, vol. 20(3), pages 375-396.
    • Handle: RePEc:ire:issued:v:20:n:03:2017:p:375-396
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    References listed on IDEAS

    as
    1. Ho, Lok Sang & Wong, Gary Wai-chung, 2009. "The first step on the housing ladder: A natural experiment in Hong Kong," Journal of Housing Economics, Elsevier, vol. 18(1), pages 59-67, March.
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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