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Long-term and Short-term Determinants of Property Prices in Hong Kong

Author

Listed:
  • Frank Leung

    (Research Department, Hong Kong Monetary Authority)

  • Kevin Chow

    (Research Department, Hong Kong Monetary Authority)

  • Gaofeng Han

    (Research Department, Hong Kong Monetary Authority)

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:hkg:wpaper:0815
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    File URL: http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP08_15_full.pdf
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    References listed on IDEAS

    as
    1. Kostas Tsatsaronis & Haibin Zhu, 2004. "What drives housing price dynamics: cross-country evidence," BIS Quarterly Review, Bank for International Settlements, March.
    2. 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.
    3. 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.
    4. Eloisa T Glindro & Tientip Subhanij & Jessica Szeto & Haibin Zhu, 2008. "Are Asia-Pacific Housing Prices Too High For Comfort?," Working Papers 2008-11, Monetary Policy Group, Bank of Thailand.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Yiu, Matthew S. & Yu, Jun & Jin, Lu, 2013. "Detecting bubbles in Hong Kong residential property market," Journal of Asian Economics, Elsevier, vol. 28(C), pages 115-124.
    2. repec:bis:bisbpc:94-12 is not listed on IDEAS
    3. Chan Lily & Ng Heng Tiong & Rishi Ramchand, 2012. "A cluster analysis approach to examining Singapore’s property market," BIS Papers chapters,in: Bank for International Settlements (ed.), Property markets and financial stability, volume 64, pages 43-53 Bank for International Settlements.
    4. Dong He, 2013. "Hong Kong’s Approach to Financial Stability," International Journal of Central Banking, International Journal of Central Banking, vol. 9(1), pages 299-313, March.
    5. Chong, Terence Tai Leung & Yiu, Alex Wing-Ho, 2017. "The Nexus between Visitor Arrivals and Residential Property Rents in Hong Kong," MPRA Paper 80531, University Library of Munich, Germany.
    6. Abdullah Yavas, 2013. "Asset Price Bubbles and Monetary Policy," Working Papers 102013, Hong Kong Institute for Monetary Research.
    7. Leung, Charles Ka Yui & Chow, Kenneth & Yiu, Matthew & Tam, Dickson, 2010. "House Market in Chinese Cities: Dynamic Modeling, In-Sampling Fitting and Out-of-Sample Forecasting," MPRA Paper 27367, University Library of Munich, Germany.
    8. Ashvin Ahuja & Lillian Cheung & Gaofeng Han & Nathan Porter & Wenlang Zhang, 2010. "Are House Prices Rising Too Fast in China?," Working Papers 1008, Hong Kong Monetary Authority.
    9. Ashvin Ahuja & Lillian Cheung & Gaofeng Han & Nathan Porter & Wenlang Zhang, 2011. "Are Housing Prices Rising Too Fast in China?," Working Papers id:3646, eSocialSciences.
    10. repec:bla:pacecr:v:22:y:2017:i:3:p:312-331 is not listed on IDEAS

    More about this item

    Keywords

    Property price; overheating; co-integration; clustering analysis;

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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