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A Tale of Two Cities: Mainland Chinese Buyers in the Hong Kong Housing Market

Author

Listed:
  • Yi Fan
  • Maggie Rong
  • Wayne Xinwei Wan
  • Zhenping Wang

Abstract

This article examines the impact of mainland Chinese buyers in the Hong Kong housing market, using complete transaction records between 2001 and 2017. We find that mainland buyers pay an average price premium of 1.4% compared with locals. The premiums are estimated to be 3.5% for large-sized luxury units and 1.6% for homes in central locations. The mechanisms that underlie the price premiums include a hedging effect, residential sorting, and information barriers, of which the hedging motive has the strongest impact. Mainland buyers’ price premiums rise significantly when the Chinese currency depreciates or China Economic Policy Uncertainty increases. Our study sheds light on the impact and mechanism of the ““China shock” on the global housing markets.

Suggested Citation

  • Yi Fan & Maggie Rong & Wayne Xinwei Wan & Zhenping Wang, 2023. "A Tale of Two Cities: Mainland Chinese Buyers in the Hong Kong Housing Market," Review of Finance, European Finance Association, vol. 27(6), pages 2205-2232.
    • Handle: RePEc:oup:revfin:v:27:y:2023:i:6:p:2205-2232.
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    File URL: http://hdl.handle.net/10.1093/rof/rfad006
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    More about this item

    Keywords

    Hong Kong housing market; Price premiums; Mainland buyers; Hedging effect; Residential sorting; Information barriers;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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