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

Author

Listed:
  • R. S Craig
  • Changchun Hua

Abstract

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.

Suggested Citation

  • R. S Craig & Changchun Hua, 2011. "Determinants of Property Prices in Hong Kong SAR; Implications for Policy," IMF Working Papers 11/277, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/277
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    References listed on IDEAS

    as
    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 O Igan, 2011. "Policies for Macrofinancial Stability; Options to Deal with Real Estate Booms," IMF Staff Discussion Notes 11/02, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jean-Francois Carpantier & Javier Olivera Angulo & Philippe Van Kerm, 2017. "Macroprudential policy and household wealth inequality," Working Papers Department of Economics 584609, KU Leuven, Faculty of Economics and Business, Department of Economics.
    2. Tillmann, Peter, 2013. "Capital inflows and asset prices: Evidence from emerging Asia," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 717-729.
    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. Meghana Ayyagari & Thorsten Beck & Maria Soledad Martinez Peria, 2017. "Credit growth and macroprudential policies: preliminary evidence on the firm level," BIS Papers chapters,in: Bank for International Settlements (ed.), Financial systems and the real economy, volume 91, pages 15-34 Bank for International Settlements.
    6. Kwok-Chiu Lam, 2016. "The Responsiveness of Hong Kong Private Residential Housing Prices," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 26-36.
    7. 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.
    8. José García-Montalvo & Josep M. Raya, 2017. "Constraints on LTV as a Macroprudential Tool: A Precautionary Tale," Working Papers 1008, Barcelona Graduate School of Economics.
    9. repec:eee:jfinin:v:33:y:2018:i:c:p:33-57 is not listed on IDEAS
    10. repec:bis:bisbpc:94-13 is not listed on IDEAS
    11. Bennani, T. & Després, M. & Dujardin, M. & Duprey, T. & Kelber, A., 2014. "Macroprudential framework:key questions applied to the French case," Occasional papers 9, Banque de France.
    12. Kennedy, Gerard & Stuart, Rebecca, 2016. "Housing supply after the crisis," Economic Letters 12/EL/16, Central Bank of Ireland.
    13. Zulkhibri, Muhamed & Naiya, Ismaeel, 2016. "Assessment of Macroprudential Policy in a Dual Banking Sector," Working Papers 2016-2, The Islamic Research and Teaching Institute (IRTI).
    14. 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.
    15. repec:bla:pacecr:v:22:y:2017:i:3:p:312-331 is not listed on IDEAS
    16. repec:eee:finsta:v:31:y:2017:i:c:p:167-185 is not listed on IDEAS

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