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Determinants of Property Prices in Hong Kong SAR: Implications for Policy

  • R. Sean Craig
  • Changchun Hua
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    This paper uses an econometric model of residential property prices in Hong Kong SAR to assess the effectiveness of alternative policies in slowing the increase in property prices. The rapid rise in property prices is well explained by macroconomic fundamentals; real GDP per capital, real domestic credit, construction costs, land supply, and the real interest rate. Policy can influence the property market though land supply and prudential and tax policy, with the latter policies taking the form of a stamp duty on property transactions and a tighter loan-to-value ratio (LTV) on lending. Land supply is the most effective policy insturment for restraining property price increases but it operates with a significant lag. The LTV and stamp duty dampen speculative activity that drives up property prices. While these policies can slow the increase in the short run, they should be guided by their long run objectives of financial stability and counteracting speculation.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/277.

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    Length: 15
    Date of creation: 01 Nov 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/277
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    1. Neng Lai & Ko Wang, 1999. "Land-Supply Restrictions, Developer Strategies and Housing Policies: The Case in Hong Kong," International Real Estate Review, Asian Real Estate Society, vol. 2(1), pages 143-159.
    2. Giovanni Dell'Ariccia & Pau Rabanal & Christopher W. Crowe & Deniz Igan, 2011. "Policies for Macrofinancial Stability: Options to Deal with Real Estate Booms," IMF Staff Discussion Notes 11/02, International Monetary Fund.
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