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Detecting Bubbles in Hong Kong Residential Property Market

  • Matthew S. Yiu

    (ASEAN + 3 Macroeconomic Research Office)

  • Jun Yu

    ()

    (Sim Kee Boon Institute for Financial Economics, School of Economics and Lee Kong Chian School of Business)

  • Lu Jin

    ()

    (Hong Kong Monetary Authority)

Registered author(s):

This study uses a newly developed bubble detection method (Phillips, Shi and Yu, 2011) to identify real estate bubbles in the Hong Kong residential property market. Our empirical results reveal several positive bubbles in the Hong Kong residential property market, including one in 1995, a stronger one in 1997, another one in 2004, and a more recent one in 2008. In addition, the method identifies two negative bubbles in the data, one in 2000 and the other one in 2001. These empirical results continue to be valid for the mass segment and the luxury segment. However, the method finds a bubble in early 2011 in the overall market as well as in the mass segment but not in the luxury segment. This result suggests that the bubble in early 2011 in the Hong Kong real estate market came more strongly from the mass segment under the demand pressure from end‐users of small‐to‐medium sized apartments.

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File URL: https://mercury.smu.edu.sg/rsrchpubupload/20850/31_2012_Detecting_Bubbles_in_Hong_Kong_Residential.pdf
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Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 31-2012.

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Length: 22 pages
Date of creation: Aug 2012
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:31-2012
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  1. Diba, Behzad T & Grossman, Herschel I, 1988. "Explosive Rational Bubbles in Stock Prices?," American Economic Review, American Economic Association, vol. 78(3), pages 520-30, June.
  2. Eloisa T Glindro & Tientip Subhanij & Jessica Szeto & Haibin Zhu, 2008. "Determinants of house prices in nine Asia-Pacific economies," BIS Working Papers 263, Bank for International Settlements.
  3. Chang, Kuang-Liang & Chen, Nan-Kuang & Leung, Charles Ka Yui, 2012. "The dynamics of housing returns in Singapore: How important are the international transmission mechanisms?," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 516-530.
  4. Charles Ka Yui Leung, 2004. "Macroeconomics and Housing: A Review of the Literature," Discussion Papers 00004, Chinese University of Hong Kong, Department of Economics.
  5. International Monetary Fund, 2010. "Are House Prices Rising too Fast in Hong Kong SAR?," IMF Working Papers 10/273, International Monetary Fund.
  6. Peter C. B. Phillips & Jun Yu, 2011. "Dating the timeline of financial bubbles during the subprime crisis," Quantitative Economics, Econometric Society, vol. 2(3), pages 455-491, November.
  7. 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.
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  11. Kenneth D. West, 1986. "A Specification Test for Speculative Bubbles," NBER Working Papers 2067, National Bureau of Economic Research, Inc.
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  17. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
  18. Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-30, September.
  19. Blanchard, Olivier Jean, 1979. "Speculative bubbles, crashes and rational expectations," Economics Letters, Elsevier, vol. 3(4), pages 387-389.
  20. Malhar Nabar & Ashvin Ahuja, 2011. "Safeguarding Banks and Containing Property Booms; Cross-Country Evidenceon Macroprudential Policies and Lessons From Hong Kong SAR," IMF Working Papers 11/284, International Monetary Fund.
  21. Refet S. Gürkaynak, 2008. "Econometric Tests Of Asset Price Bubbles: Taking Stock ," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 166-186, 02.
  22. 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.
  23. R. Sean Craig & Changchun Hua, 2011. "Determinants of Property Prices in Hong Kong SAR; Implications for Policy," IMF Working Papers 11/277, International Monetary Fund.
  24. Driffill, John & Sola, Martin, 1998. "Intrinsic bubbles and regime-switching," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 357-373, July.
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