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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, Singapore Management University)

  • 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: http://skbi.smu.edu.sg/downloads/skbi/CoFiE/Working%20Papers/BubbleDetectionHK05.pdf
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Paper provided by Sim Kee Boon Institute for Financial Economics in its series Working Papers with number CoFie-03-2012.

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Length: 21 Pages
Date of creation: May 2012
Date of revision:
Publication status: Published in SMU-SKBI CoFie Working Paper
Handle: RePEc:skb:wpaper:cofie-03-2012
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  1. Peter C. B. Phillips & Shu-Ping Shi & Jun Yu, 2012. "Testing for Multiple Bubbles," Working Papers 13-2012, Singapore Management University, School of Economics.
  2. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October.
  3. Peter C.B. Philips & Yangru Wu & Jun Yu, 2009. "Explosive Behavior in the 1990s Nasdaq : When Did Exuberance Escalate Asset Values?," Finance Working Papers 23050, East Asian Bureau of Economic Research.
  4. 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.
  5. 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.
  6. Charles Ka-Yui Leung, 2004. "Macroeconomics and Housing: A Review of the Literature," Departmental Working Papers _164, Chinese University of Hong Kong, Department of Economics.
  7. 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.
  8. Peter C. B. Phillips & Jun Yu, 2009. "Dating the Timeline of Financial Bubbles During the Subprime Crisis," Working Papers 18-2009, Singapore Management University, School of Economics.
  9. 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.
  10. 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.
  11. Refet Gurkaynak, 2005. "Econometric Tests of Asset Price Bubbles: Taking Stock," Finance 0504008, EconWPA.
  12. West, Kenneth D, 1987. "A Specification Test for Speculative Bubbles," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 553-80, August.
  13. International Monetary Fund, 2010. "Are House Prices Rising too Fast in Hong Kong SAR?," IMF Working Papers 10/273, International Monetary Fund.
  14. Luigi Montrucchio & Fabio Privileggi, 2001. "On Fragility of Bubbles in Equilibrium Asset Pricing Models of Lucas-Type," ICER Working Papers - Applied Mathematics Series 05-2001, ICER - International Centre for Economic Research.
  15. 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.
  16. 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.
  17. Blanchard, Olivier Jean, 1979. "Speculative bubbles, crashes and rational expectations," Economics Letters, Elsevier, vol. 3(4), pages 387-389.
  18. Qin Xiao & Yunhua Liu, 2010. "The residential market of Hong Kong: rational or irrational?," Applied Economics, Taylor & Francis Journals, vol. 42(7), pages 923-933.
  19. 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.
  20. Driffill, John & Sola, Martin, 1998. "Intrinsic bubbles and regime-switching," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 357-373, July.
  21. International Monetary Fund, 2010. "Are House Prices Rising too Fast in China?," IMF Working Papers 10/274, International Monetary Fund.
  22. Vyacheslav Mikhed & Petr Zemčík, 2009. "Testing for Bubbles in Housing Markets: A Panel Data Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 38(4), pages 366-386, May.
  23. Christoph Duenwald, 2000. "Property Prices and Speculative Bubbles; Evidence From Hong Kong SAR," IMF Working Papers 00/2, International Monetary Fund.
  24. 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.
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