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Are House Prices Rising too Fast in Hong Kong SAR?

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  • International Monetary Fund

Abstract

Sharp increase in house prices in Hong Kong SAR in 2009-2010 has led to concerns of an emerging real estate bubble. According to our measure of price deviation from fundamentals, which should be taken as an early warning indicator of market exuberance, the current level of house prices in Hong Kong SAR does not seem to be significantly higher than would be justified by underlying fundamentals. Moreover, unlike advanced economies before 2007-8, deviation from fundamentals has not been persistent in Hong Kong.Going forward, low interest rate and improving growth prospects, as well as a tight supply, particularly in the mass market, means that house price growth will continue to be strong.This is the period in which vulnerability may be accumulating, and tight prudential standards and fiscal measures will be required to tame price inflation.

Suggested Citation

  • International Monetary Fund, 2010. "Are House Prices Rising too Fast in Hong Kong SAR?," IMF Working Papers 10/273, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/273
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    Cited by:

    1. Wu, Jing & Gyourko, Joseph & Deng, Yongheng, 2016. "Evaluating the risk of Chinese housing markets: What we know and what we need to know," China Economic Review, Elsevier, vol. 39(C), pages 91-114.
    2. Yu-Fu Chen & Michael Funke & Aaron Mehrotra, 2017. "What Drives Urban Consumption in Mainland China? The Role of Property Price Dynamics," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 383-409, August.
    3. 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.
    4. Tie-Ying Liu & Hsu-Ling Chang & Chi-Wei Su & Xu-Zhao Jiang, 2016. "China's housing bubble burst?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(2), pages 361-389, April.
    5. Michael, Bryane & Zhao, Simon, 2016. "Bubble Economics How Big a Shock to China’s Real Estate Sector Will Throw the Country into Recession, and Why Does It Matter?," EconStor Preprints 141314, ZBW - German National Library of Economics.
    6. Roland Döhrn & Philipp an de Meulen & Tobias Kitlinski & Torsten Schmidt & Simeon Vosen, 2011. "Die wirtschaftliche Entwicklung im Ausland zur Jahreswende 2010/2011 - Aufschwung setzt sich fort – Divergenzen bleiben groß," RWI Konjunkturbericht, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 34, 03.
    7. Xi Chen & Michael Funke, 2013. "Real-Time Warning Signs of Emerging and Collapsing Chinese House Price Bubbles," National Institute Economic Review, National Institute of Economic and Social Research, vol. 223(1), pages 39-48, February.
    8. Tie Ying Liu & Chi Wei Su & Xu Zhao Jiang & Tsangyao Chang, 2015. "Is There Excess Liquidity in China?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(3), pages 110-126, May.
    9. Gauvin, Ludovic & Rebillard, Cyril, 2013. "Towards Recoupling? Assessing the Impact of a Chinese Hard Landing on Commodity Exporters: Results from Conditional Forecast in a GVAR Model," MPRA Paper 65457, University Library of Munich, Germany.
    10. repec:eco:journ1:2017-04-18 is not listed on IDEAS
    11. Ng, Eric C.Y., 2015. "Housing market dynamics in China: Findings from an estimated DSGE model," Journal of Housing Economics, Elsevier, vol. 29(C), pages 26-40.
    12. Döhrn, Roland & an de Meulen, Philipp & Kitlinski, Tobias & Schmidt, Torsten & Vosen, Simeon, 2011. "Die wirtschaftliche Entwicklung im Ausland: Aufschwung setzt sich fort - Divergenzen bleiben groß," RWI Konjunkturberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, vol. 62(1), pages 5-37.
    13. M. Albert & C. Jude & C. Rebillard, 2015. "The Long Landing Scenario: Rebalancing from Overinvestment and Excessive Credit Growth. Implications for Potential Growth in China," Working papers 572, Banque de France.
    14. 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.
    15. repec:eee:regeco:v:67:y:2017:i:c:p:1-10 is not listed on IDEAS
    16. Funke, Michael & Leiva-Leon, Danilo & Tsang, Andrew, 2017. "Mapping China’s time-varying house price landscape," BOFIT Discussion Papers 21/2017, Bank of Finland, Institute for Economies in Transition.
    17. Iris Claus & Les Oxley & Jie Chen & Xuehui Han, 2014. "The Evolution Of The Housing Market And Its Socioeconomic Impacts In The Post-Reform People'S Republic Of China: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 652-670, September.
    18. Mylène Gaulard, 2014. "Les dangers de la bulle immobilière chinoise," Revue Tiers-Monde, Armand Colin, vol. 0(3), pages 77-96.
    19. Wen, Xing-Chun & He, Ling-Yun, 2015. "Housing demand or money supply? A new Keynesian dynamic stochastic general equilibrium model on China’s housing market fluctuations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 432(C), pages 257-268.
    20. Bian, Timothy Yang & Gete, Pedro, 2015. "What drives housing dynamics in China? A sign restrictions VAR approach," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 96-112.
    21. repec:kap:jrefec:v:55:y:2017:i:3:d:10.1007_s11146-016-9586-8 is not listed on IDEAS

    More about this item

    Keywords

    Financial stability; Hong Kong Special Administrative Region of China; House price; price misalignment; prudential measures; mortgage; real interest rates; inflation; mortgage interest;

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