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Price discovery of property markets in Shenzhen and Hong Kong

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  • Eddie Chi-man Hui
  • Ivan Ng

Abstract

Hong Kong and Shenzhen, while being interrelated in many aspects, have encountered different types of demand shocks throughout the past decade. This is likely due to disparities in market conditions and degrees of government regulations. In the light of such differences in property price trends, this research first investigates the relationships between housing prices and market fundamentals for both cities; and then it explores whether a housing price bubble existed for them in 2006. The results indicate that housing prices seem to have interacted abnormally with market fundamentals in recent years, especially for Shenzhen. In addition, while Shenzhen's housing prices are mainly explained by previous housing prices and personal income, most economic indicators explain Hong Kong's housing prices well. With regard to price bubbles, a puny bubble which amounts to as much as 4.5% of the housing price was formed in Shenzhen in 2006. In the meantime, the housing price bubble for Hong Kong had been diminished. Though currently not at dangerous levels, housing price bubbles should be taken with caution especially in today's China, characterized by overinvestment and rapid policy changes.

Suggested Citation

  • Eddie Chi-man Hui & Ivan Ng, 2009. "Price discovery of property markets in Shenzhen and Hong Kong," Construction Management and Economics, Taylor & Francis Journals, vol. 27(12), pages 1175-1196.
    • Handle: RePEc:taf:conmgt:v:27:y:2009:i:12:p:1175-1196
    DOI: 10.1080/01446190903365640
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    References listed on IDEAS

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    1. Yukio Noguchi & James M. Poterba, 1994. "Introduction to "Housing Markets in the United States and Japan"," NBER Chapters, in: Housing Markets in the United States and Japan, pages 1-10, National Bureau of Economic Research, Inc.
    2. Yukio Noguchi & James M. Poterba, 1994. "Housing Markets in the United States and Japan," NBER Books, National Bureau of Economic Research, Inc, number nogu94-2, July.
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    Cited by:

    1. Yongheng Deng & Eric Girardin & Roselyne Joyeux & Shuping Shi, 2017. "Did bubbles migrate from the stock to the housing market in China between 2005 and 2010?," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 276-292, August.
    2. Yongheng Deng & Eric Girardin & Roselyne Joyeux, 2015. "Fundamentals and the Volatility of Real Estate Prices in China: A Sequential Modelling Strategy," Working Papers 222015, Hong Kong Institute for Monetary Research.
    3. Deng, Yongheng & Girardin, Eric & Joyeux, Roselyne, 2018. "Fundamentals and the volatility of real estate prices in China: A sequential modelling strategy," China Economic Review, Elsevier, vol. 48(C), pages 205-222.
    4. I-Chun Tsai, 2022. "The connectedness between Hong Kong and China real estate markets: spillover effect and information transmission," Empirical Economics, Springer, vol. 63(1), pages 287-311, July.

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