Long-term and Short-term Determinants of Property Prices in Hong Kong
Property prices in Hong Kong increased markedly in late 2007 and early 2008, raising concerns about the risk of overheating in the property market. In this paper, we use co-integration analysis to analyze the short- and long-run determinants of property prices in Hong Kong. We find that the long-run determinants include GDP per capita, real interest rate, land supply, and the residential investment deflator, which reflects the impact of inflation and real construction cost. In the short-run, property price is also affected by equity price. Based on this framework, we assess the market conditions in early 2008. We also do graphical and clustering analyses of six property market indicators to supplement the co-integration analysis.
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- Jonathan McCarthy & Richard Peach, 2004. "Are home prices the next "bubble"?," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-17.
- Kostas Tsatsaronis & Haibin Zhu, 2004. "What drives housing price dynamics: cross-country evidence," BIS Quarterly Review, Bank for International Settlements, March.
- DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
- Eloisa T Glindro & Tientip Subhanij & Jessica Szeto & Haibin Zhu, 2008. "Are Asia-Pacific Housing Prices Too High For Comfort?," Working Papers 2008-11, Economic Research Department, Bank of Thailand.
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